Problem 5-47 Straightforward ABC calculations (LO 5-1. 5-2. 5-4, 5-5) {The foiio wing information appiies to the questions dismayed below} Kitchen King's Toledo plant manufactures three product lines, all multi-burner, ceramic cook tops. The plant's three product models are the Regular {REG}, the Advanced (ADV), and the Gourmet {GMT}. Until recently. the plant used ajob- order product-costing system, with manufacturing overhead applied on the basis of direct-labor hours. The following table displays the basic data upon which the traditional costing system was based. REG ADV GMT Planned annual production: Volume in units 5,999 4,999 1,999 Production runs 49 runs E 125 units 49 runs E 199 units 29 runs E 59 units Direct material $129 $151 $293 Direct labor: $121 $299 $24? (not including setup} (9 hrs. E $19 I hr.) {11 hrs. E $19 I hr.) [13 hrs. E $19 I hr.) Machine hours {HH} per product unit 19 NH 12 HH 1? HH Total MH consumed 59,999 48,999 1?,999 by product line in a year [19 HH I 5,999) [12 HH I 4,999] [1? "H x 1.999] The annual budgeted overhead is $1,224,000, and the company's predetermined overhead rate is $12 per direct-labor hour. The product costs for the three product models. as reported under the plant's traditional costing system, are shown in the following table. REG Dii' GMT Direct material $129.99 $151.99 $293.99 Direct labor [not including setup] 121.99l9 hr. E $191 299.99l11 hr. E $19] 24?.99l13 hr. E $19} Manufacturing overhead 193.99l9 hr. E $12} 132.99l11 hr. E $12} 156.99l13 hr. E $12) Tut.\" $493.\" $492.\" $696 .199 Kitchen King's pricing policy is to set a target price for each product equal to 130 percent of the full product cost. Due to price competition from other appliance manufacturers, REG units were selling at $525, and ADV units were selling for $623. These prices were somewhat below the rm's target prices. However. these results were partially offset by greater- than-expected prots on the GMT product line. Management had raised the price on the EMT model to $800, which was higher than the original target price. Even at this price, Kitchen King's customers did not seem to hesitate to place orders, Moreover. the company's competitors did not mount a challenge in the market for the GMT product line. Nevertheless, concern continued to mount in Toledo about the difculty in the REG and ADV markets. After all, these were the plant's bread-and-butter products, with projected annual sales of 5,000 REG units and 4,000 ADV units. Kitchen King's director of cost management, Angela Ramirez, had been thinking for some time about a refinement in the Toledo plant's product-costing system. Ramirez wondered if the traditional, volume-based system was providing management with accurate data about product costs. She had read about activity-based costing, and wondered if ABC would be an improvement to the plant's product-costing system. After some discussion, an ABC proposal was made to the company's top management, and approval was obtained. The data collected for the new ABC system is displayed in the following table. Cost Driver Activity Product Quantity for Activity Cost Pool Cost Driver Line Product Line Machine related $310,500 Machine Hours REG 50, 000 ADV 48, 000 GMT 17, 000 Total 115, 000 Material handling 52,500 Production Runs REG 40 ADV 40 GMT 20 Total 100 Purchasing 75, 000 Purchase Orders REG 100 ADV 96 GMT 104 Total 300 Setup 85, 000 Production Runs REG 10 ADV 40 GMT 20 Total 100 Inspection 27 ,500 Inspection Hours REG 406 ADV 400 GMT 300 Total 1, 10 Shipping 66, 000 Shipments REG 500 ADV 400 GMT 200 Total 1, 100 Engineering 32,500 Engineering Hours REG 250 ADV 200 GMT 200 Total 650 Facility 575,000 Machine Hours REG 50, 000 ADV 48, 000 GMT 17, 000 Total 115, 000Problem 5-47 Part 4 4. Complete the table given below to compare the overhead cost, total product cost, and target price for each product line under the two alternative costing systems. (Round your intermediate calculations and final answers to 2 decimal places.) REG ADV GMT Reported unit overhead cost: Traditional, volume-based costing system $ 108.00 $ 132.00 $ 156.00 Activity-based costing system 103.50 123.15 213.90 Reported unit product cost (direct material, direct labor and overhead): Traditional, volume-based costing system 408.00 492.00 606.00 Activity-based costing system 403.50 483.15 663.90 Sales price data: Original target price (Based on traditional, volume-based costing system) 530.40 639.60 787.80 New target price (Based activity-based costing system) 524.55 628.10 863.07 Actual current selling price 525.00