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Problem 4-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2
The following data are for the two products produced by Tadros Company.
| | Product A | | Product B |
| Direct materials | $ | 15 per unit | | $ | 24 per unit |
| Direct labor hours | | 0.3 DLH per unit | | | 1.6 DLH per unit |
| Machine hours | | 0.1 MH per unit | | | 1.2 MH per unit |
| Batches | | 125 batches | | | 225 batches |
| Volume | | 10,000 units | | | 2,000 units |
| Engineering modifications | | 12 modifications | | | 58 modifications |
| Number of customers | | 500 customers | | | 400 customers |
| Market price | $ | 30 per unit | | $ | 120 per unit |
| |
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
| | Costs | Driver |
| Indirect manufacturing | | | | |
| Engineering support | $ | 24,500 | | Engineering modifications |
| Electricity | | 34,000 | | Machine hours |
| Setup costs | | 52,500 | | Batches |
| Nonmanufacturing | | | | |
| Customer service | | 81,000 | | Number of customers |
| |
Required: (Loss amounts should be indicated with minus sign. Round your per unit cost answers to 2 decimal places.)
5. Which method of product costing gives better information to managers of this company?
multiple choice
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Plantwide overhead rate method
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Activity-based costing method
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Departmental overhead rate method
Answer & Explanation
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