Welk 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, H16Z and P25P, about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,464,480 and the company's estimated total direct labor-hours for the year is 24,000.
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 manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.

Question

Welk 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, H16Z and P25P, about which it has provided the following data:
  The company's estimated total manufacturing overhead for the year is $1,464,480 and the company's estimated total direct labor-hours for the year is 24,000.
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 manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.

Quizplus · Accepted Answer

The Answer is a. Traditional Manufacturing Overhead Costs
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,464,480 ÷ 24,000 DLHs = $61.02 per DLH

a. Traditional Manufacturing Overhead Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,464,480 ÷ 24,000 DLHs = $61.02 per DLH b. ABC Manufacturing Overhead Costs Overhead cost for H16Z Overhead cost for P25P

b. ABC Manufacturing Overhead Costs
a. Traditional Manufacturing Overhead Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,464,480 ÷ 24,000 DLHs = $61.02 per DLH b. ABC Manufacturing Overhead Costs Overhead cost for H16Z Overhead cost for P25P

Overhead cost for H16Z
a. Traditional Manufacturing Overhead Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,464,480 ÷ 24,000 DLHs = $61.02 per DLH b. ABC Manufacturing Overhead Costs Overhead cost for H16Z Overhead cost for P25P

Overhead cost for P25P
a. Traditional Manufacturing Overhead Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,464,480 ÷ 24,000 DLHs = $61.02 per DLH b. ABC Manufacturing Overhead Costs Overhead cost for H16Z Overhead cost for P25P

Welk Manufacturing Corporation Has a Traditional Costing System in Which