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determine the unit product cost of each product for the current period using the act 637636

Cabalo Company manufactures two products, Product C and Product D. The company estimated it would incur $130,890 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor hours. Data concerning the current period”s operations appear below:

 

Product C

Product D

Estimated unit production

400 units

1,200 units

Direct labor hours per unit

0.70 hour

1.20 hours

Direct materials cost per unit

$10.70

$16.70

Direct labor cost per unit

$11.20

$19.20

Required:

a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year.

b. The company is considering using an activity based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor hours. The activity based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:

 

Estimated

Expected Activity

 

Overhead

Product C

Product D

Total

Activity Cost Pool

Costs

100

130

230

Machine setups

$ 13,570

810

1,270

2,080

Purchase orders

91,520

280

1,440

1,720

General factory

25,800

 

 

 

 

$130,890

 

 

 

Determine the unit product cost of each product for the current period using the activity based costing approach.

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