Active Body Control makes two

crunch machines

AB Cruncher (100K units x $5 DM)

AB Cycler (20K units x $3 DM)

Each takes 1 hour of direct labor at

$10 per hour

Overhead is $1,000,000

Calculate traditional product

costs using DL hours as driver

. 1. Active Body Control. Active Body Control makes two crunch machines AB Cruncher (100K units x $5 DM) and AB Cycler (20K units x $3 DM) Each takes 1 hour of direct labor at $10 per hour Estimated total overhead is $1,000,000 a) Calculate traditional product cost per unit using DL hours as the OH allocation base Cost Source Ab Cruncher cost per unit Ab Cycler Unit cost per unit Direct Materials Direct Labor Overhead Total Cost per Unit There are three OH activities: The Ab Cruncher uses Ordering: 2000 orders Machining: 500,000 machine hours Testing: 3000 tests The Ab Cycler uses 500 orders 300,000 machine hours 1,000 tests b) Calculate ABC overhead allocation rates and the resulting ABC overhead costs allocated per unit. Cost Pool Total Dollars Spent Total # of Activities Allocation Rate on Activity Done (Cost driver) ($ per unit of cost driver) Ordering $150,000 $ order Machining $650,000 m. hrs. $ I mach.hr Testing $200,000 I test orders tests $ Cost Pool # of activ. used by Ab Cruncher $OH allocated to Ab Cruncher # of activ. used by Ab Cycler $OH allocated to Ab Cycler Ordering Machining Testing All Crunchers = $ All Cyclers = $ Total $OH per product line + # units $OH per unit Per Cruncher: $ Per Cycler: $