Question

Eliezrie, Inc., manufactures and sells two products: Product G8 and Product O0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product G8	880	6.8	5,984
Product O0	480	3.8	1,824
Total direct labor-hours			7,808

The direct labor rate is $23.90 per DLH. The direct materials cost per unit for each product is given below:

	Direct Materials Cost per Unit
Product G8	$131.10
Product O0	$131.50

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product G8	Product O0	Total
Labor-related	DLHs	$	64,555	5,984	1,824	7,808
Machine setups	setups		63,390	1,300	690	1,990
Order size	MHs		374,508	5,700	6,900	12,600
		$	502,453

Which of the following statements concerning the unit product cost of Product G8 is true? (Round your intermediate calculations to 2 decimal places.)

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $141.79.

• The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $261.87.

• The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $261.87.

• The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $141.79.

Answer 1

traditional method
502453/7808
64.35105	per hr
					product	product	total
					G-8	o0
	Direct materials				131.10	131.50
	direct labor				162.52	90.82
	overhead				437.59	244.53
	unit cost				731.21	466.85	1198.06
ABC					product	product
					G-8	o0
	labor related		8.267802		49474.53	15080.47	64555
	machine setups		31.85427		41410.55	21979.45	63390
	order size		29.72286		169420.3	205087.7	374508
	total				260305.4	242147.6	502453
	units				880	480
	overhead per unit				295.80	504.47
	Direct materials				131.10	131.50
	direct labor				162.52	90.82
	unit cost				589.42	726.79
	Difference				141.79	259.94
	Answer)	the unit product cost of product G8 under traditional costing is greater
		than its unit product cost under activity based costing by 141.79