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1. St. James, Inc., currently uses traditional costing procedures, applying
$800,000 of overhead to products Beta and Zeta on the basis of direct labor
hours. The company is considering a shift to activity-based costing and the
creation of individual cost pools that will use direct labor hours (DLH),
production setups (SU), and number of parts components (PC) as cost
drivers. Data on the cost pools and respective driver volumes follow.
| Product | Pool No. 1(Driver: DLH) | Pool No. 2 (Driver: SU) | Pool No. 3 (Driver: PC) |
| Beta | 1,200 | 45 | 2,250 |
| Zeta | 2,800 | 55 | 750 |
| | | | |
| Pool Cost | $160,000 | $280,000 | $360,000 |
The overhead cost allocated to Beta by using traditional costing procedures
would be:
The overhead cost allocated to Beta by using activity-based costing
procedures would be:
Total amount of direct material for Beta is $200,000 and Zeta is $300,000.
The amount of direct labor is $50 per direct labor hour for both product
lines. What is total manufacturing cost for both using abc and traditional
costing in total and per unit?
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