Kuechle 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,I49L and B26W,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,793,790 and the company's estimated total direct labor-hours for the year is 57,000.
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:
$$\begin{array} { l r r }
& \text { I49L } & \text { B26W } \
\text { Direct materials per unit ......... } & \$ 17.80 & \$ 55.40 \
\text { Direct labor per unit.............. } & \$ 16.10 & \$ 55.20 \
\text { Direct labor-hours per unit..... } & 0.70 & 2.40 \
\text { Annual production.................. } & 30,000 & 15,000
\end{array}$$
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.
$\begin{array}{c}
\begin{array}{lll}
\text {Activities and Activity Measures..........}\
\text {Supporting direct labor (DLHs)............}\
\text {Setting up machines (setups)................}\
\text {Parts administration (part types).........}\
\text {Total....................................................}
\end{array}
\begin{array}{c}
\text {Estimated Overhead Cost}\
\$ 285,000 \
437,190 \
\underline{1,071,600 }\
\underline{\underline{ \$ 1,793,790}}
\end{array}
\end{array}$
$$\begin{array} { c r r r }
\text { Activities } & { \text { I49L } } &{ \text { B26W } } & { \text { Total } } \
\text { Supporting direct labor ...... } & 21,000 & 36,000 & \mathbf { 5 7 , 0 0 0 } \
\text { Setting up machines........... } & 798 & \mathbf { 2 , 5 6 5 } & \mathbf { 3 , 3 6 3 } \
\text { Parts administration......... } & 1,539 & \mathbf { 1 , 1 4 0 } & \mathbf { 2 , 6 7 9 }
\end{array}$$

Question

Kuechle 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,I49L and B26W,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,793,790 and the company's estimated total direct labor-hours for the year is 57,000.
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:
 $$\begin{array} { l r r } 
& \text { I49L } & \text { B26W } \
\text { Direct materials per unit ......... } & \$ 17.80 & \$ 55.40 \
\text { Direct labor per unit.............. } & \$ 16.10 & \$ 55.20 \
\text { Direct labor-hours per unit..... } & 0.70 & 2.40 \
\text { Annual production.................. } & 30,000 & 15,000
\end{array}$$ 
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.
 $\begin{array}{c}
\begin{array}{lll}
 \text {Activities and Activity Measures..........}\
 \text {Supporting direct labor (DLHs)............}\
 \text {Setting up machines (setups)................}\
 \text {Parts administration (part types).........}\
 \text {Total....................................................}
\end{array}
\begin{array}{c}
\text {Estimated Overhead Cost}\
\$ 285,000 \
437,190 \
\underline{1,071,600 }\
\underline{\underline{ \$ 1,793,790}} 
\end{array}
\end{array}$
 $$\begin{array} { c r r r } 
\text { Activities } &  { \text { I49L } } &{ \text { B26W } } & { \text { Total } } \
\text { Supporting direct labor ...... } & 21,000 & 36,000 & \mathbf { 5 7 , 0 0 0 } \
\text { Setting up machines........... } & 798 & \mathbf { 2 , 5 6 5 } & \mathbf { 3 , 3 6 3 } \
\text { Parts administration......... } & 1,539 & \mathbf { 1 , 1 4 0 } & \mathbf { 2 , 6 7 9 }
\end{array}$$

Quizplus · Accepted Answer

The Answer of Kuechle 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,I49L and B26W,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,793,790 and the company's estimated total direct labor-hours for the year is 57,000.
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:
 $$\begin{array} { l r r } 
& \text { I49L } & \text { B26W } \
\text { Direct materials per unit ......... } & \$ 17.80 & \$ 55.40 \
\text { Direct labor per unit.............. } & \$ 16.10 & \$ 55.20 \
\text { Direct labor-hours per unit..... } & 0.70 & 2.40 \
\text { Annual production.................. } & 30,000 & 15,000
\end{array}$$ 
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.
 $\begin{array}{c}
\begin{array}{lll}
 \text {Activities and Activity Measures..........}\
 \text {Supporting direct labor (DLHs)............}\
 \text {Setting up machines (setups)................}\
 \text {Parts administration (part types).........}\
 \text {Total....................................................}
\end{array}
\begin{array}{c}
\text {Estimated Overhead Cost}\
\$ 285,000 \
437,190 \
\underline{1,071,600 }\
\underline{\underline{ \$ 1,793,790}} 
\end{array}
\end{array}$
 $$\begin{array} { c r r r } 
\text { Activities } &  { \text { I49L } } &{ \text { B26W } } & { \text { Total } } \
\text { Supporting direct labor ...... } & 21,000 & 36,000 & \mathbf { 5 7 , 0 0 0 } \
\text { Setting up machines........... } & 798 & \mathbf { 2 , 5 6 5 } & \mathbf { 3 , 3 6 3 } \
\text { Parts administration......... } & 1,539 & \mathbf { 1 , 1 4 0 } & \mathbf { 2 , 6 7 9 }
\end{array}$$

Kuechle Manufacturing Corporation Has a Traditional Costing System in Which