Exercise 2A-2 Activity-Based Absorption Costing as an Alternative to Traditional Product Costing [LO2-5]

Harrison Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:

	Rascon		Parcel
Direct materials cost per unit	$	14.00	$	7.00
Direct labor cost per unit	$	2.60	$	3.80
Direct labor-hours per unit		.40		.45
Number of units produced		12,000		40,000

These products are customized to some degree for specific customers.

Required:

1. The company's manufacturing overhead costs for the year are expected to be $592,800. Using the company's traditional costing system, compute the unit product costs for the two products.

2. Management is considering an activity-based absorption costing system in which half of the overhead would continue to be allocated based on direct labor-hours and half would be allocated based on engineering design time. This time is expected to be distributed as follows during the upcoming year:

	Rascon	Parcel	Total
Engineering design time (in hours)	4,100	4,100	8,200

Compute the unit product costs for the two products using the proposed activity-based absorption costing system.

Exercise 2A-2 Activity-Based Absorption Costing as an Alternative to Traditional Product Costing (LO2- 5) Harrison Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow: Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced Rascon Parcel $ 14.00 $ 7.00 $ 2.60 $ 3.80 .40 .45 12,000 40,000 These products are customized to some degree for specific customers. Required: 1. The company's manufacturing overhead costs for the year are expected to be $592,800. Using the company's traditional costing system, compute the unit product costs for the two products 2. Management is considering an activity-based absorption costing system in which half of the overhead would continue to be allocated based on direct labor-hours and half would be allocated based on engineering design time. This time is expected to be distributed as follows during the upcoming year: Engineering design time (in hours) Rascon Parcel 4,100 4,100 Total 8, 200 Compute the unit product costs for the two products using the proposed activity-based absorption costing system. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the unit product costs for the two products using the proposed activity-based absorption costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Rascon Parcel Unit product cost 17.55 X