Asked by Suraksha Lamichhane on Jun 23, 2024
Verified
Rutty, Inc., manufactures and sells two products: Product U6 and Product K9.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: 
The direct labor rate is $28.70 per DLH.The direct materials cost per unit for each product is given below: 
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: 
Required:
In all computations involving dollars in the following requirements, round off your answer to the nearest whole cent.
a.Determine the unit product cost of each product under the company's traditional costing method.
b.Determine the unit product cost of each product under the activity-based costing method.
Activity-Based Costing
An accounting method that assigns costs to products or services based on the activities they require and the resources consumed by these activities.
Direct Labor-Hours
The total hours worked by employees directly involved in the manufacturing process, directly affecting the production of goods.
Direct Materials Cost
The cost of raw materials that can be directly traced to the production of a specific product.
- Assess and compare the expenses per unit through traditional and activity-based costing approaches.
- Execute the application of overhead costs in accordance with direct labor hours through traditional costing approaches.
- Evaluate the variance in assigning overhead costs using traditional costing techniques versus Activity-Based Costing.
Verified Answer
ST
Supercat TwistyJun 27, 2024
Final Answer :
a.Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $546,029 ÷ 6,100 DLHs = $89.51 per DLH (rounded)
Computation of overhead applied to each product:
Computation of traditional unit product costs: 
b.Computation of activity rates: 
Computation of the overhead cost per unit under activity-based costing. 
Computation of unit product costs under activity-based costing. 
= $546,029 ÷ 6,100 DLHs = $89.51 per DLH (rounded)
Computation of overhead applied to each product:
Computation of traditional unit product costs: b.Computation of activity rates: Computation of the overhead cost per unit under activity-based costing. Computation of unit product costs under activity-based costing. 
Learning Objectives
- Assess and compare the expenses per unit through traditional and activity-based costing approaches.
- Execute the application of overhead costs in accordance with direct labor hours through traditional costing approaches.
- Evaluate the variance in assigning overhead costs using traditional costing techniques versus Activity-Based Costing.