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 product's development process relevant to costs.

Product S Product T

Requires 3,840 hours of testing Requires 960 hours of testing

Requires 5,040 units of computing power Requires 2,160 units of computing power

Requires 25 developer hours to implement Requires 75 developer hours to implement

Cost Items Cost of Each Activity

Testing:$28,800

Computing power:$43,200

Developer hourly cost:$15 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 25% Percentage of developer hours7 5%

Testing cost$ Testing cost$

Computing cost$ Computing cost$

Developer cost$ Developer cost$

Total cost$ Total cost$