Question

Chapter 3: Applying Excel
2
3	Enter a formula into each of the cells marked with a ? below
4	Review Problem: Activity-Based Costing
5
6	Data
7		Deluxe	Tourist
8	Annual sales in units	1,000	9,000
9	Direct materials per unit	$33	$33
10	Direct labor-hours per unit	1	1
11
12	Direct labor rate	$17	per DLH
13
14		Estimated
15		Overhead	Expected Activity
16	Activities and Activity Measures	Cost	Deluxe	Tourist	Total
17	Labor related (direct labor-hours)	$ 35,000	1,000	9,000	10,000
18	Machine setups (setups)	120,000	40	60	100
19	Production orders (orders)	70,000	35	15	50
20	General factory (machine-hours)	150,000	10,000	10,000	20,000
21		$ 375,000

(a)	What is the traditional unit product cost for the Deluxe model now? (Round your intermediate calculations and final answer to 2 decimal places.)

    

(b)	What is the traditional unit product cost for the Tourist model? (Round your intermediate calculations and final answer to 2 decimal places.)

    

(c)	What is the ABC unit product cost for the Deluxe model? (Round your intermediate calculations and final answer to 2 decimal places.)

    

     

(d)	What is the ABC unit product cost for the Tourist model? (Round your intermediate calculations and final answer to 2 decimal places.)

    

     

Answer 1

Answer a & b.
Predetermined Overhead Rate = $375,000 (Total Overhead) / 10,000 DLH
Predetermined Overhead Rate = $37.50 per DLH
Calculation of Unit Product Cost
Under Traditional Costing
	Deluxe	Moderate
Direct Material	33.00	33.00
Direct Labor	17.00	17.00
Applied Overhead	37.50	37.50
Product Cost per Unit	87.50	87.50
Answer c.
ABC Costing
Activity	Overhead	Cost Driver Quantity		Allocation Rate
Indirect Costs
Labor Related	35,000.00	10,000	dlh	3.50	per dlh
Machine Setups	120,000.00	100	setups	1,200.00	per setups
Production Orders	70,000.00	50	orders	1,400.00	per order
General Factory	150,000.00	20,000	mach hrs	7.50	per mach hrs
Total	375,000.00
Assigning Overhead Cost to Product Model
Using ABC Method
	Activity Based Overhead Rate		Deluxe			Tourist
			Cost Driver Incurred		OH Allocated	Cost Driver Incurred		OH Allocated
Labor Related	3.50	per dlh	1,000	dlh	3,500.00	9,000	dlh	31,500.00
Machine Setups	1,200.00	per setups	40	setups	48,000.00	60	setups	72,000.00
Production Orders	1,400.00	per order	35	orders	49,000.00	15	orders	21,000.00
General Factory	7.50	per mach hrs	10,000	mach hrs	75,000.00	10,000	mach hrs	75,000.00
Total Overhead					175,500			199,500
No. Of Units					1,000			9,000
Overhead per Book					175.50			22.17
Calculation of Unit Product Cost
Under ABC Costing
	Deluxe	Moderate
Direct Material	33.00	33.00
Direct Labor	17.00	17.00
Applied Overhead	175.50	22.17
Product Cost per Unit	225.50	72.17