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Faz, Inc., manufactures and sells two products: Product X0 and Product W7. Data concerning the expected...

Faz, Inc., manufactures and sells two products: Product X0 and Product W7. 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 X0 2,000 5 10,000
Product W7 500 2 1,000
Total direct labor-hours 11,000

The direct labor rate is $29.60 per DLH. The direct materials cost per unit is $154.50 for Product X0 and $136 for Product W7.

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 X0 Product W7 Total
Labor-related DLHs $ 282,078 10,000 1,000 11,000
Production orders orders 19,948 600 800 1,400
Order size MHs 243,974 4,100 4,200 8,300
$ 546,000

Which of the following statements concerning the unit product cost of Product W7 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 W7 under traditional costing is greater than its unit product cost under activity-based costing by $221.68.

  • The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $77.22.

  • The unit product cost of Product W7 under traditional costing is greater than its unit product cost under activity-based costing by $77.22.

  • The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $221.68.

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