Chapter 4, End Of Chapter, REVIEW PROBLEMS, Exercise 1
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Tyson Lamp Company is noted for its full line of quality lamps. The company operates one of its plants in Green Bay, Wisconsin. That plant produces two types of lamps: classical and modern. Jane Martinez, president of the company, recently decided to change from a unit-based, traditional costing system to an activity-based costing system. Before making the change company wide, she wanted to assess the effect on the product costs of the Green Bay plant. This plant was chosen because it produces only two types of lamps; most other plants produce at least a dozen. To assess the effect of the change, the following data have been gathered (for simplicity, assume one process): 

Under the current system, the costs of operating equipment, materials handling, and setups are assigned to the lamps on the basis of machine hours. Lamps are produced and moved in batches.

 

Required:
 

Compute the unit cost of each lamp using the current unit-based approach.


Explanation

Answer

Classical lamps = $5.25
Modern lamps = $8.50
 

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