Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision.

A. Activities with duration drivers:

B. Activities with consumption ratios and costs:

C. Products with cycle time and practical capacity:

Required:

1. Using cycle time and practical capacity for each product, calculate the total time for all primary

activities.Comment on the relationship to ABC.

2. Calculate the overhead rate that DBC uses to assign costs. Comment on the relationship to a unit-based plantwide overhead rate.

3. Use the overhead rate calculated in Requirement 2 to calculate (a) the overhead cost per unit for each product, and (b) the total overhead assigned to each product. How does this compare to the ABC assignments shown in Part B of the Information set?

4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.

Transcribed Image Text:

Activities Products Rework Testing Changeover Assembly Total Hours 12,000 8,000 20,000 25,000 25,000 50,000 Printer A Printer B 1,000 4,000 5,000 8,000 12,000 8,000 12,000 20,000 Total hours 20,000 Activities Cost Products Changeover Assembly Testing Rework Assignment $155,000 $155,000 $310,000 0.60 Printer A Printer B Activity costs 0.20 0.40 0.80 0.80 0.40 0.60 0.20 $75,000 $120,000 $60,000 $55,000