Comparing Two Products under Traditional and Activity-Based Costing

Compare two projects under development by the same company. The following are a few aspects of each products development process relevant to costs.

Product S		Product T
Requires 4,000 hours of testing		Requires 1,000 hours of testing
Requires 4,270 units of computing power		Requires 1,830 units of computing power
Requires 20 developer hours to implement		Requires 80 developer hours to implement

Cost Items	Cost of Each Activity
Testing:	$24,400
Computing power:	$36,600
Developer hourly cost:	$13 per hour

Traditional Costing

Traditional costing would take the proportion of a direct cost, such as direct labor hours, and use it as the basis for allocating overhead costs, such as computing power and testing. In the following table, use developer hours as the basis for assigning overhead costs (computing and developer costs) to each project. If required, round your answers to the nearest dollar.

Product S			Product T
Percentage of developer hours	20%		Percentage of developer hours	80%
Testing cost	$		Testing cost	$
Computing cost	$		Computing cost	$
Developer cost	$		Developer cost	$
Total cost	$		Total cost	$

Activity-Based Costing

Using the data above for products S and T, calculate the costs using activity-based costing. Allocate the costs of testing, computing, and development based on the rates of activity consumed by each product's development process. If required in your computations, round per unit costs to the nearest cent. Round your final answers to the nearest dollar.

Cost	Activity Base
Testing	Hours of testing
Computing cost	Units of computing power
Developer cost	Development hours

Product S			Product T
Testing cost	$		Testing cost	$
Computing cost	$		Computing cost	$
Developer cost	$		Developer cost	$
Total cost	$		Total cost	$