Kerox Company manufactures two types of laser printers: monochrome and multifunction. Currently, manufacturing overhead is allocated based solely on the consumption of direct labor hours.
The company is considering changing its current costing system to the ABC costing system. If it decides to use this method, it would separate the manufacturing support costs into three activities: handling purchase orders, inspecting, and setting up production flow.

Data provided:
Expected monochrome production for upcoming qtr 2000.00
Expected multifunction production for upcoming qtr 1300.00
Manufacturing costs 25000.00
Labor hours per monochrome 0.50
Labor hours per multifunction 0.70
                               

                                                   Selling Price   Direct Material     Direct Labor
Monochrome                                   $110                    $20                         $5
Multifunction                                   $395                    $80                        $22

                                                   Monochrome     Multifunction          Total
Number of purchase orders        70                           110                    180
Number of inspection                   50                           250                      300
Number if setups                           75                           375                      450

Manufacturing cost categories
Cost for handling purchase orders $ 10,000
Cost for inspecting $ 6,000
Cost for setting up production flow $ 9,000

Required

Part a) For each product, calculate the manufacturing cost per unit under the current costing system (using direct labor hours to allocate manufacturing overhead).

Part b) For each product, calculate the manufacturing cost per unit under the ABC costing system.

Answer rating: 100% (QA)

Part a Calculation of manufacturing cost per unit under the current costing system using direct labor hours to allocate manufacturing overhead For mon... View the full answer