Question

Ridgeland Inc. makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The Accounting Department has identified the following overhead costs and cost drivers for next year:

Ridgeland Inc. makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The Accounting Department has identified the following overhead costs and cost drivers for next year: Overhead Item Expected Costs Cost Driver Maximum Quantity Setup costs $244,800 Number of setups 7,200 Ordering costs 65,000 Number of orders 65,000 Maintenance 460,000 Number of machine hours 80,000 Power 44,000 Number of kilowatt hours 440,000 Total predicted direct labor hours for next year is 26,000. The following data are for two recently completed jobs: Job 201 Job 202 Cost of direct materials $8,000 $9,500 Cost of direct labor $16,100 $59,800 Number of units completed 800 650 Number of direct labor hours 220 270 Number of setups 15 19 Number of orders 21 42 Number of machine hours 460 360 Number of kilowatt hours 200 300 a. Determine the unit cost for each job using a traditional plantwide overhead rate based on direct labor hours. Round cost per unit answers to two decimal places when applicable. Job 201 Job 202 Direct materials Answer Answer Direct labor Answer Answer Overhead Answer Answer Total cost Answer Answer Units produced Answer Answer Cost per unit Answer Answer b. Determine the unit cost for each job using ABC. Round cost per unit answers to two decimal places when applicable. Job 201 Job 202 Direct materials Answer Answer Direct labor Answer Answer Setup cost Answer Answer Ordering costs Answer Answer Maintenance costs Answer Answer Power Answer Answer Total job costs Answer Answer Units produced Answer Answer Cost per unit Answer Answer

Answer 1

a
	Job 201	Job 202
Direct materials	8000	9500
Direct labor	16100	59800
Overhead	6886	8451
Total cost	30986	77751
Units produced	800	650
Cost per unit	38.73	119.62
b
	Job 201	Job 202
Direct materials	8000	9500
Direct labor	16100	59800
Setup cost	510	646
Ordering costs	21	42
Maintenance costs	2645	2070
Power	20	30
Total job costs	27296	72088
Units produced	800	650
Cost per unit	34.12	110.90
Workings:
a
Total Overhead costs	813800		=244800+65000+460000+44000
Divide by Predicted direct labor hours	26000
Traditional plantwide overhead rate	31.30
	Job 201	Job 202
Overhead	=220*31.30	=270*31.30
b
	Activty rate
Setup costs	34.00		=244800/7200
Ordering costs	1.00		=65000/65000
Maintenance	5.75		=460000/80000
Power	0.10		=44000/440000
	Job 201	Job 202
Setup cost	=15*34	=19*34
Ordering costs	=21*1	=42*1
Maintenance costs	=460*5.75	=360*5.75
Power	=200*0.1	=300*0.1