MA GD1

Instructions:

Complete the following activities in good form. Use excel or word only. Provide all supporting calculations to show how you arrived at your numbers.

Activity-Based Costing:

Welk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, H16Z and P25P, about which it has provided the following data

                                                        H16Z         P25P 

Direct materials per unit................ $10.20       $50.50

Direct labor per unit ......................   $8.40       $25.20

Direct labor-hours per unit ............     0.40           1.20 

Annual production......................... 30,000        10,000

The company’s estimated total manufacturing overhead for the year is $1,464,480 and the company’s estimated total direct labor-hours for the year is 24,000. 

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: 

 Activities and Activity Measures              Estimated Overhead Cost 

 Supporting direct labor (DLHs)................. $ 552,000 

 Setting up machines (setups) ..................... 132,480 

 Parts administration (part types)................   780,000

                                                                   ------------------- 

 Total..........................................................$1,464,480 

                                              H16Z         P25P         Total 

 Supporting direct labor ...... 12,000       12,000        24,000 

 Setting up machines........... 864            240             1,104 

 Parts administration ........... 600            960             1,560 

 Required: 

a. Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system. 

b. Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.