Problem 4-1A 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	$	15 per unit		$	24 per unit
Direct labor hours		0.3 DLH per unit			1.6 DLH per unit
Machine hours		0.1 MH per unit			1.2 MH per unit
Batches		125 batches			225 batches
Volume		10,000 units			2,000 units
Engineering modifications		12 modifications			58 modifications
Number of customers		500 customers			400 customers
Market price	$	30 per unit		$	120 per unit

The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

	Costs			Driver
Indirect manufacturing
Engineering support	$	24,500		Engineering modifications
Electricity		34,000		Machine hours
Setup costs		52,500		Batches
Nonmanufacturing
Customer service		81,000		Number of customers

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

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

multiple choice

• Plantwide overhead rate method

• Activity-based costing method

• Departmental overhead rate method