ACCT3032TuteSols38.pdf - Essay 149 Award 1.00 point Diculty...

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149. Award: 1.00 point Essay Difficulty: 3 Hard Learning Objective: 09-04 Explain how activity-based costing and a two-stage product system are related. Merkel Industries 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, Large and Small, about which it has provided the following data: Large Small Direct materials per unit $ 17.80 $ 55.40 Direct labor per unit $ 16.10 $ 55.20 Direct labor-hours per unit 0.70 2.40 Annual production 30,000 15,000 The company's estimated total manufacturing overhead for the year is $1,793,790 and the company's estimated total direct labor-hours for the year is 57,000. 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) $ 285,000 Setting up machines (setups) 437,190 Parts administration (part types) 1,071,600 Total $ 1,793,790 Activities Large Small Total Supporting direct labor 21,000 36,000 57,000 Setting up machines 798 2,565 3,363 Parts administration 1,539 1,140 2,679 Required: a. Determine the unit product cost of each of the company's two products under the traditional costing system.
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