Guinta 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, O48C and G94Z, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $1,102,500 and the company's estimated total direct labor-hours for the year is 42,000.
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

Guinta 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, O48C and G94Z, about which it has provided the following data:  The company's estimated total manufacturing overhead for the year is $1,102,500 and the company's estimated total direct labor-hours for the year is 42,000.
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.

Quizplus · Accepted Answer

The Answer is a. Traditional Unit Product Costs
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,102,500 ÷ 42,000 DLHs = $26.25 per DLH

a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,102,500 ÷ 42,000 DLHs = $26.25 per DLH b. ABC Unit Product Costs Overhead cost for O48C Overhead cost for G94Z

b. ABC Unit Product Costs a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,102,500 ÷ 42,000 DLHs = $26.25 per DLH b. ABC Unit Product Costs Overhead cost for O48C Overhead cost for G94Z

Overhead cost for O48C a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,102,500 ÷ 42,000 DLHs = $26.25 per DLH b. ABC Unit Product Costs Overhead cost for O48C Overhead cost for G94Z

Overhead cost for G94Z a. Traditional Unit Product Costs Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,102,500 ÷ 42,000 DLHs = $26.25 per DLH b. ABC Unit Product Costs Overhead cost for O48C Overhead cost for G94Z

Guinta Manufacturing Corporation Has a Traditional Costing System in Which