Unformatted text preview: verhead into
various cost pools to provide more
accurate cost information.
ABC, thus, supplements – it does not
replace – the traditional cost system.
4-12 ActivityActivity-Based Costing
Atlas Company produces two automotive antitheft
devices: The Boot: A high volume item with sales totaling 25,000 per
The Club: A low volume item with sales totaling 5,000 per year. Each product requires 1 hour of direct labor Total annual direct labor hours (DLH) 30,000 (25,000 + 5000).
Direct labor cost $12 per unit for each product. Expected annual manufacturing overhead costs
Direct materials cost: The
The Boot - $40 per unit.
The Club - $30 per unit. Chapter
4-13 Costing Under Traditional Costing Manufacturing Costs
Total unit cost Products
The Boot The Club
$72 * Predetermined overhead rate: $900,000 ÷ 30,000 DLH = $30 per DLH
Overhead = predetermined overhead rate times direct labor hours
($30 × 1 hr. = $30) Chapter
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