earch this book Q Read Study AE 40. Activity-Based Costing Versus Traditional Approach. Carson Company produces a regular computer monitor that sells for $175 and a premium computer monitor that sells for $300. Last year, total overhead costs of $3,675,000 were allocated based on direct labor hours. A total of 63,000 direct labor hours were required last year to build 36,000 regular monitors (1.75 hours per unit), and 42,000 direct labor hours were required to build 12,000 premium monitors (3.50 hours per unit). Total direct labor and direct materials costs for last year were as follows: Regular Monitor Premium Monitor Direct materials $1,908,000 $ 900,000 Direct labor $1,728,000 $1,200,000 The management of Carson Company would like to use activity-based costing to allocate overhead rather than one plantwide rate based on direct labor hours. The following estimates are for the activities and related cost drivers identified as having the greatest impact on overhead costs. Estimated cost Driver Activity Total Estimated Activity Cost Driver Overhead Costs Regular Premium Purchase orders Number of purchase orders $1,200,000 400 600 Production setups Number of setups 1,125,000 120 30 Quality inspections Inspection hours 750,000 3,600 8,400 Packaging and shipping Number of units shipped $ 600,000 36,000 12,000 Total 53,675,000 1,000 150 12,000 48.000 Required: a. Calculate the direct materials cost per unit and direct labor cost per unit for each product. b. 1. Using the plantwide allocation method, calculate the predetermined overhead rate and determine the overhead cost per unit allocated to the regular and premium monitors. Ilsing the plantacide allocation method calculate the noduct cost per unit for the regular and DE FLASHCARDS V QUIZ REVIOUS Required: a. Calculate the direct materials cost per unit and direct labor cost per unit for each product. b. 1. Using the plantwide allocation method, calculate the predetermined overhead rate and determine the overhead cost per unit allocated to the regular and premium monitors. 2. Using the plantwide allocation method, calculate the product cost per unit for the regular and premium monitors. Round results to the nearest cent. C. 1. Using the activity-based costing allocation method, calculate the predetermined overhead rate for each activity. (Hint: Step 1 through step 3 in the activity-based costing process have already been done for you; this is step 4.) 2. Using the activity-based costing allocation method, allocate overhead to each product. (Hint: This is step 5 in the activity-based costing process.) Determine the overhead cost per unit. Round results to the nearest cent. 3. What is the product cost per unit for the regular and premium monitors? d. Calculate the per unit profit for each product using the plantwide approach and the activity-based costing approach. e. How much did the profit per unit change for each product when moving from the plantwide approach to the activity-based costing approach? What caused this change? Tous Traditional Annroach, Activity-Based Management. Fine AutoSave Of Ch 3 WP.xls - Compatibility Mode File Home Insert Page Layout Formulas Data Review View Help Search X Arial 11 = General ' ' a. A- Paste 25 Wrap Text Merge & Center BIU $ -% -3 C For Clipboard 5 Font Alignment Number N46 X f F M N 24 ABC DE G H 1 J K 21 22 b. "(1) The plantwide allocation used by the company is based on Estimated Overhead Costs The rate is calculated as: Estimated overhead cost $3,675,000 Estimated activity in allocation base 105,000 hours $35 per direct labor hour 26 27 29 Calculate the overhead cost per unit for each product here: 31 32 33 34 35 36 37 39 40 41 (2) Per unit product costs are calculated as follows: Regular Monitor Direct materials (from parta) $ 53.00 Direct labor (from part a) 48.00 Overhead 61.23 Total product cost per unit $1,625 per unit Premium Monitor $ 75,00 100.00 122.50 $298 per unit 42. 43 44 45 49 50 BE 24 P 40 P 40 (continued) P 40 (continued FS FO FB F7 Ch 3 WP.xls - Compatibility Mode - Excel Search me Insert Page Layout Formulas Data Review View Help Times New Roman 12 - A A 2 Wrap Text BIU-BOA. SEE Merge & Center Text $ - % -8 Conditional Format as Cell Formatting Table Styles Styles R Font Alignment Number > so E F G H L MN o P - (1) Predetermined overhead rates are calculated for each activity as follows: (a) (a) (b) Estimated Estimated Predetermined Overhead Cost Driver Overhead Activity Cost Driver Costs Activity Rate Purchase orders Number of purchase orders $1,200,000 1,000 orders $1,200.00 per order Production setups Number of setups 1.125,000 150 schups $7.500.00 per setup Quality inspections Inspection hours 750,000 12.000 hours $62.50 per inspect hour Packaging and shipping Number of units shipped 600,000 48,000 units $12.50 per unit shipped Total $3,744,925 (2) Overhead costs are allocated below. Regular Monitor Premium Montitor Predetermined Cost Cost Overhead Driver Overhead Driver Overhead Activity Rate Activity Allocated Activity Allocated Purchase orders Production setup per setup Quality inspections per inspection Packaging and shipping per unit shipped Total overhead costs allocated Total company wide overhead costs 55 Overhead cost per unit for each product (rounded)** per order BE 24 0.40 P 40 continued P 40 conti d c FY F10 FS FIL $ % & 7 8 Arial 11 - A A Wrap Text General Paste BIU a. A Merge & Center $ - % Clipboard 5 Font Alignment Numt A1 X f J K M Premium Monitor A B C D E F G 4 40. Activity-Based Costing Versus Traditional Approach (continued) 6 c. '(3) Per unit product costs are: 8 Regular 9 Monitor 10 Direct materials (from part a) 11 Direct labor (from parta) 12 Overhead (from partc) 13 Total product cost per unit 14 15 d. Traditional Costing Direct labor hours as the allocation base) Regular 18 Monitor 19 Direct materials 20 Direct labor 21 Overhead 22 Total product cost per unit (a) $162.25 23 Sales price (b) 24 Profit- (b) - (a) 10 17 Premium Monitor 20 26 28 29 Activity-Based Costing (Several different allocation bases) Regular Monitor Direct materials Dirt shor PO 40 continued P 40 continued 2) Premium Monitor 30 Esc + C FS F6 F7 AutoSave OM Ch 3 WP.xls - Compatibil File Home Insert Page Layout Formulas Data Review View Help Search X Arial -11 - A A 0.0.A. General Paste BIU 25 Wrap Text Merge & Center $ - % Clipboard Font Alignment Number Al fo M 4ABCDE F 30 Direct materials 31 Direct labor 32 Overhead 33 Total product cost per unit (C) 34 35 Profit (loss) - (d)-() 36 37 38 Enter your answer for parte here: 39 $158.00 Sales price (d) 40 41 42 43 44 45 45 I 48 50 51 52 53 55 BE 24 PA 40 (continued P 40 (continued 2)