Baldwin Company produces treadmills. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, and so on. At the beginning of the year, the following data were prepared for this plant:

Additionally, the following overhead activity costs are reported:
Maintenance .........$ 400,000
Engineering support ....... 600,000
Material handling ....... 800,000
Setups ............. 500,000
Purchasing .......... 300,000
Receiving ........... 200,000
Paying suppliers ......... 200,000
$3,000,000
At the end of the year, every item was realized as budgeted.

Required:
1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs.
2. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using the functional-based method. Which cost is more accurate?Explain.

Transcribed Image Text:

Standard Model Deluxe Model 20,000 $280 S3 million 25,000 Expected quantity Selling price Prime costs Machinc hours Direct labor hours Engineering support (hours) Receiving (orders processed) Materials handling (number of moves) Purchasing (number of requisitions) Maintenance (hours used) Paying suppliers (invoices processed) Setting up batches (number of setups) 10,000 S575 $3.5 million 25,000 50,000 21,000 3,000 30,000 1,000 16,000 2,500 5 9,000 2,000 10,000 500 4,000 2,500