Torri 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, B40W and C63J, about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $2,656,000 and the company's estimated total direct labor-hours for the year is 64,000.
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:
Required:a. Determine the unit product cost of each of the company's two products under the traditional costing system.b. Determine the unit product cost of each of the company's two products under activity-based costing system.

Question

Torri 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, B40W and C63J, about which it has provided the following data:

The company's estimated total manufacturing overhead for the year is $2,656,000 and the company's estimated total direct labor-hours for the year is 64,000.
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:

Required:a. Determine the unit product cost of each of the company's two products under the traditional costing system.b. Determine the unit product cost of each of the company's two products under activity-based costing system.

Selena Charles · Accepted Answer

Final Answer :

a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $2,656,000 ÷ 64,000 direct labor-hours = $41.50 per direct labor-hour

b. ABC Manufacturing Overhead Costs
a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $2,656,000 ÷ 64,000 direct labor-hours = $41.50 per direct labor-hour b. ABC Manufacturing Overhead Costs Overhead cost for B40W Overhead cost for C63J

Overhead cost for B40W
a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $2,656,000 ÷ 64,000 direct labor-hours = $41.50 per direct labor-hour b. ABC Manufacturing Overhead Costs Overhead cost for B40W Overhead cost for C63J

Overhead cost for C63J
a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $2,656,000 ÷ 64,000 direct labor-hours = $41.50 per direct labor-hour b. ABC Manufacturing Overhead Costs Overhead cost for B40W Overhead cost for C63J

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