2 Required Information Problem 5-45 (Algo) Volume-Based Costing versus ABC [LO 5-1, 5-3, 5-5] [The following Information applies to the questions displayed below.] 24 points ADA Pharmaceutical Company produces three drugs-Diomycin, Homycin, and Addolin-belonging to the analgesic (pain- killer) family of medication. Since its inception four years ago, ADA has used a direct labor hour-based system to assign Skipped manufacturing overhead costs to products. Eme Weissman, the president of ADA Pharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firm's current costing and activity-based costing systems. eBook ADA has the following budget information for the year: Diomycin Homycin Addolin References Cost of direct materials $ 200, 090 $ 260, 090 $ 253,090 Cost of direct labor 245, 090 229, 000 258, 000 Number of direct labor hours 7, 150 6,750 1, 950 Number of capsules 950, 090 495, 000 295, 000 ADA has Identified the following activities and cost drivers and has assigned them a total overhead cost of $197,500. Budgeted Budgeted Cost Activity Cost Driver Overhead Cost Driver Volume Machine setup Setup hours $ 15,500 1, 550 Plant management Number of Workers 35 ,500 1, 156 Supervision of direct labor Direct labor hours 45, 500 15, 500 Quality inspection Inspection hours 49, 900 1, 025 Order expediting Customers served 51, 100 620 Total overhead 6197, 500 Takedo selected the cost drivers with the following justifications: SETUP HOURS: The cost driver of setup hours is used because the same product takes about the same amount of setup time regardless of size of batch. For different products, however, the setup time varies. NUMBER OF WORKERS: Plant management includes plant maintenance and corresponding managerial duties that make production possible. This activity depends on the number of workers. The more workers involved, the higher the cost. DIRECT LABOR HOURS: Supervisors spend their time supervising production. The amount of time they spend on each product is proportional to the direct labor hours worked.INSPECTION HOURS: Inspection involves testing a number of units in a batch. The time varies for different products but is the same for all similar products. NUMBER OF CUSTOMERS SERVED: The need to expedite production increases as the number of customers served by the company increases. Thus, the number of customers served by ADA is a good measure of expediting production orders. Takedo gathered the following information about the cost driver volume for each product: Diomycin Homycin Addolin Setup hours 175 575 775 Number of workers 175 375 575 Direct labor hours 7, 150 6,750 1,950 Inspection hours 125 175 675 Customers served 40 95 475 Part 1 (Algo) Required: 1. Use the firm's current direct labor hour-based costing system to calculate the unit cost of each product. 2. Use the activity-based costing system to calculate the unit cost of each product.Required: 'I. Use the rm's current dlrect labor hourbased costlng system to calculate the unit cost of each product. 2. Use the acthIty-based costing system to calculate the unit cost of each product. Complete this question by entering your answers in the tabs helow. Required 1 Required 2 Use the rm's current direct labor hourbased costing system to calculate the unit cost of each product. {Round your intermediate calculations and nal answers to two decimal places.) Direct Materials Direct Labor 200,000.00 $ $ 245,000.00 $ $ 445,000.00 5 489,000.00 5 511,000.00 050,000 495,000 295,000 200,000.00 $ 253,000.00 229,000.00 $ 258,000.00 Overhead Total Cost Number of Capsules Cost per capsule Required: 1. Use the rm's current direct labor hourbased costlng system to calculate the unit cost of each product. 2. Use the acthty-based costlhg systemic calculate the unlt cost of each product. Complete this question by entering your answers in the tails below. Required 1 Required 2 Use the activitybased casting system to calculate the unit cost of each product. (Round intermediate calculations to 2 decimal places. Round "Cost per capsule" to 2 decimal places.) Direct Materials 55 20000000 33 200,000.00 33 253,000.00 Direct Labor 55 24500000 33 220,000.00 33 253,000.00 TotalCDSl $ 445.000.00 5 439,000.00 5 511,000.00 Number of Capsules 950,000 405,000 205,000 ( Requied 1