Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2

The following data are for the two products produced by Tadros Company.

	Product A			Product B
Direct materials	$	20 per unit		$	25 per unit
Direct labor hours		0.5 DLH per unit			1.5 DLH per unit
Machine hours		0.4 MH per unit			1.2 MH per unit
Batches		200 batches			360 batches
Volume		16,000 units			3,600 units
Engineering modifications		18 modifications			82 modifications
Number of customers		500 customers			400 customers
Market price	$	55 per unit		$	220 per unit

The company's direct labor rate is $32 per direct labor hour (DLH). Additional information follows.

	Costs			Driver
Indirect manufacturing
Engineering support	$	53,600		Engineering modifications
Electricity		42,880		Machine hours
Setup costs		171,520		Batches
Nonmanufacturing
Customer service		85,500		Number of customers

Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.)

1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.

1.2 What is the gross profit per unit?

2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?

2.2 What is the cost of providing customer service to each customer?

Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate?

3.1 Determine the manufacturing cost per unit of each product line using ABC.

3.2 What is the gross profit per unit?

4.1 How much gross profit is generated by each customer of Product A and Product B using ABC?

4.2 Is the gross profit adequate for each customer of Product A and B using ABC?

5. Which method of product costing gives better information to managers of this company?