Question

Traditional Product Costing Versus Activity-Based Costing
High Country Outfitters, 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	$1,404,000	Number of setups	7,200
Ordering costs	360,000	Number of orders	60,000
Maintenance	1,200,000	Number of machine hours	80,000
Power	120,000	Number of kilowatt hours	600,000

Total predicted direct labor hours for next year is 60,000. The following data are for two recently completed jobs:

	Job 201	Job 202
Cost of direct materials	$18,500	$20,000
Cost of direct labor	$24,125	$76,250
Number of units completed	1,125	915
Number of direct labor hours	270	330
Number of setups	18	22
Number of orders	24	45
Number of machine hours	540	450
Number of kilowatt hours	270	360

a. Determine the unit cost for each job using a traditional company-wide overhead rate based on direct labor hours.
Round rate to two decimal places.
Overhead rate per direct labor hour $Answer
Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.

	Job 201	Job 202
Direct materials	$Answer	$Answer
Direct labor	Answer	Answer
Overhead	Answer	Answer
Total job cost	Answer	Answer
Units	Answer	Answer
Per unit cost	$Answer	$Answer

b. Determine the unit cost for each job using ABC. Activity-based overhead rates:

Round cost answers to the nearest whole number, when needed.

Round cost per unit to two decimal places, if needed.

Setup costs	$Answer per setup
Ordering costs	$Answer per order
Maintenance costs	$Answer per machine hour
Power	$Answer per kwh

	Job 201	Job 202
Direct materials	$Answer	$Answer
Direct labor	Answer	Answer
Overhead
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

	total estimated overhea
	Setup costs			1,404,000
	ordering costs			360,000
	maintenance			1,200,000
	power			120,000
	total estimated overhead			3,084,000
a.	overhead rate = estimated overhead/estimated direct hours
			3084,000/60,000
			51.4
	overhead rate per direct labor hour				51.4
				Job 201	job 202
	Cost of direct materials			18,500	20,000
	cost of direct labor			24,125	76,250
	overhead (270*51.4);(330*51.4)			13878	16962
	total job cost			56,503	113,212
	units			1,125	915
	per unit cost			50.22	123.73
b)	Setup costs		(1,404,000/7200)=		195	per setup
	ordering costs		(360,000/60,000)=		6	per order
	maintenance costs		(1,200,000/80,000)=		15	per MH's
	power		(120,000/600,000)=		0.2	per KWH
				Job 201	job 202
	Cost of direct materials			18,500	20,000
	cost of direct labor			24,125	76,250
	overhead
	Setup costs(195*18);(195*22)			3510	4290
	ordering costs(6*24);(6*45)			144	270
	maintenace (15*540);(15*450)			8100	6750
	power (.2*270);(.2*360)			54	72
	total job costs			54,433	107,632
	units			1,125	915
	per unit cost			48.38	117.63