Comparing costs using ABC with the plant wide overhead rate LO P1, P3, A1, A2 The following
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Comparing costs using ABC with the plant wide overhead rate LO P1, P3, A1, A2
The following data are for the two products produced by Tadros Company.
Product A | Product B | ||||
Direct materials | $ | 14 per unit | $ | 25 per unit | |
Direct labor hours | 0.6 DLH per unit | 1.5 DLH per unit | |||
Machine hours | 0.5 MH per unit | 1.1 MH per unit | |||
Batches | 110 batches | 220 batches | |||
Volume | 10,000 units | 2,000 units | |||
Engineering modifications | 8 modifications | 40 modifications | |||
Number of customers | 500 customers | 400 customers | |||
Market price | $ | 35 per unit | $ | 95 per unit per unit | |
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
Costs | Driver | |||
Indirect manufacturing | ||||
Engineering support | $ | 22,000 | Engineering modifications | |
Electricity | 28,800 | Machine hours | ||
Setup costs | 43,000 | Batches | ||
Nonmanufacturing | ||||
Customer service | 75,000 | Number of customers | ||
Required:
(Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.)
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5. Which method of product costing gives better information to managers of this company?
a. Departmental overhead rate method
b. Activity-based costing method
c. Plant wide overhead rate method
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
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