Hammer Company plans to use activitybased costing to determine its
product costs. It presently uses a single plantwide factory overhead rate for
allocating factory overhead to products, based on direct labor hours.
The total factory overhead cost is as follows:
The company determined that it performed four major activities in the
Production Support Department. These activities, along with their budgeted
activity costs, are as follows:
Hammer estimated the following activitybase usage and units produced for
each of its three products:
REQUIRED:
Determine the factory overhead cost per unit for the LCD TV and Tablet
under the single plantwide factory overhead rate method. Use direct labor
hours as the activity base.
Determine the factory overhead cost per unit for the LCD TV and Tablet
under activitybased costing. Round to two decimal places.
Which method provides more accurate product costing? Why?
