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. Book ADA has the following budget information for the year: Diomycin Homycin Addolin References Cost of direct materials $ 207, 000 $ 267, 090 $ 260, 000 Cost of direct labor 252, 000 236, 090 265, 000 Number of direct labor hours 7, 220 6,820 2, 020 Number of capsules 1, 020, 000 502, 000 302, 000 ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $201,000. Budgeted Budgeted Cost Activity Cost Driver Overhead Cost Driver Volume Machine setup Setup hours $ 16, 200 1, 620 Plant management Number of Workers 36, 20 1, 220 Supervision of direct labor Direct labor hours 46, 200 16, 200 Quality inspection Inspection hours 50, 600 1, 060 Order expediting Customers served 51, 800 655 Total overhead $201, 090 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 productionTakedo gathered the following Information about the cost driver volume for each product: Dionycin Homycin Addolin Setup hours 219 619 319 Number o+' workers 219 419 519 Direct labor hours 2,229 5,829 2,029 Inspection hours 169 219 2'19 Customers served 4? 192 519 Part 1 [Algo] Required: 1. Use the rm's current direct labor hourbased 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. Complete this question by entering your answers in the tabs below. 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 Overhead Total Cost 201000.00 iii 252,000.00 5i 459,000.00 $ 503,000.00 $ 525,000.00 1.020,000 502,000 302,000 Requied 2 > $ 25?,000.00 5 250,000.00 $ 235,000.00 5 255,000.00 Number of Capsules Cost per capsule Required: '1. Use the rm's current direct labor hourbased costlng system to calculate the unit ccnst of each product. 2. Use the activlty-based costing system to calculate the unit cost of each product. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Use the activitybased costing 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 201000.00 $ 20?,000.00 $ 260,000.00 Direct Labor 25100000 $ 235,000.00 $ 265,000.00 TDIBICDSI 459,000.00 $ 503,000.00 $ 525,000.00 Number of Capsules 1,020,000 502,000 302,000 Cost per capsule ( Requied 1