The following data are for the two products produced by Tadros Company. Product A Product B
Direct materials $14 per unit $26 per unit
Direct labor hours 0.5 DLH per unit 1.5 DLH per unit
Machine hours 0.4 MH per unit 1.1 MH per unit
Batches 95 batches 190 batches
Volume 10,000 units 2,000 units
Engineering
modifications 11 modifications 55 modifications
Number of customers 500 customers 400 customers
Market price $35 per unit $95 per unit per unit
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows:
Costs Driver
Indirect Manufacturing
Engineering support $25,500 Engineering modifications
Electricity 24,800 Machine hours
Setup costs 43,000 Batches
Nonmanufacturing
Customer service 72,000 Number of customers
Required:
1.1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.
1.2. What is the gross profit per unit?
2.1. How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?
2.2. What is the cost of providing customer service to each customer?
2.3. Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate?
3.1. Determine the manufacturing cost per unit of each product line using ABC.
3.2. What is the gross profit per unit?
4.1. How much gross profit is generated by each customer of Product A and Product B using ABC?
4.2. Is the gross profit adequate for each customer of Product A and B using ABC?
5. Which method of product costing gives better information to the managers of this company?
A) Activity-based costing method
B) Departemental overhead rate method
C) Plantwide overhead rate method