Question

Cabio Company manufactures two products, Product C and Product D. The company estimated it would incur $187,910 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 4,300 units 3,500 units Direct labor-hours per unit 2.20 hours 2.30 hours Direct materials cost per unit $ 16.60 $ 29.70 Direct labor cost per unit $ 22.00 $ 23.00

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 $ 13,190 210 220 430 Purchase orders 78,240 1,020 1,360 2,380 Order size 96,480 9,460 8,050 17,510 Total $ 187,910 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

	PART A- 1 - Predetermined overhead rate
	Fixed overhead	$       187,910.00
	Total Direct labor hour [(4300 unit x 2.20) + (3500 unit x 2.30)]	17510
	Predetermined overhead rate ($187,910/17510)	$10.73 per hour

	PART A -2 Unit product cost
		PRODUCT C	PRODUCT D
	Volume	4300	3500
	Direct material	$         71,380.00	$ 103,950.00
	Direct Labor	$         94,600.00	$    80,500.00
	Manufacturing overhead ($10.73 per labor hour)	$       101,520.77	$    86,389.23
	Total Cost	$       267,500.77	$ 270,839.23
	Number of unit	4,300.00	3,500.00
	Unit product cost	$                  62.21	$            77.38

	PART B - Unit product cost - ABC Coasting
		RATIO OF ALLOCATION	Total	PRODUCT C	PRODUCT D
	Direct material		$ 175,330.00	$    71,380.00	$ 103,950.00
	Direct Labor		$ 175,100.00	$    94,600.00	$    80,500.00
	Setup cost	210:220	$    13,190.00	$      6,441.63	$      6,748.37
	Purchase cost	1020:1360	$    78,240.00	$    33,531.43	$    44,708.57
	Ordering cost	9460:8050	$    96,480.00	$    52,124.55	$    44,355.45
	Total Cost		$ 538,340.00	$ 258,077.60	$ 280,262.40
	Number of unit			4,300.00	3,500.00
	Unit product cost			$            60.02	$            80.07