Question

Munoz Electronics produces video games in three market categories: commercial, home, and miniature. Munoz has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers:

    

Category		Total Pooled Cost			Types of Costs	Cost Driver
Unit		$	792,000		Indirect labor wages, supplies, factory utilities, machine maintenance	Machine hours
Batch			412,800		Materials handling, inventory storage, labor for setups,packaging, labeling and shipping, scheduling	Number of production orders
Product			211,100		Research and development	Time spent by research department
Facility			493,000		Rent, general utilities, maintenance, facility depreciation, admin. salaries	Square footage

     
Additional data for each of the product lines follow:     

	Commercial				Home				Miniature				Total
Direct materials cost	$	35.10	/unit		$	23.40	/unit		$	31.00	/unit			—
Direct labor cost	$	14.50	/hour		$	14.50	/hour		$	17.40	/hour			—
Number of labor hours		5,300				11,400				2,200				18,900
Number of machine hours		11,000				46,000				33,000				90,000
Number of production orders		220				1,900				680				2,800
Research and development time		11	%			18	%			71	%			100	%
Number of units		18,000				44,000				17,000				79,000
Square footage		19,000				54,000				12,000				85,000

    
Required

Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.

Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.

	Type of Product Total Cost Cost per Unit a. Commercial $ $ Home Miniature Combined total $4,635,200 b. Commercial Home Miniature Combined total $0

Answer 1