Question

Cabio Company manufactures two products, Product C and Product D. The company estimated it would incur $177,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period’s operations appear below:

	Product C			Product D
Estimated volume		3,800	units			3,000	units
Direct labor-hours per unit		1.20	hours			.80	hour
Direct materials cost per unit	$	11.60			$	23.70
Direct labor cost per unit	$	12.00			$	8.00

Required:

a-1. Compute the predetermined overhead rate under the current method. (Round your answer to 2 decimal places.)

a-2. Determine the unit product cost of each product for the current year. (Round your intermediate calculations and final answers to 2 decimal places.)

b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:

	Estimated		Expected Activity
Activity Cost Pools	Overhead Cost		Product C		Product D		Total
Machine setups	$	12,190	110		120		230
Purchase orders		75,240	820		1,160		1,980
Order size		90,480	4,560		2,400		6,960
Total	$	177,910

Determine the unit product cost of each product for the current period using the activity-based costing approach. (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1