Question

Traditional Product Costing versus Activity-Based Costing
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

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