Question

Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 3,830 direct labor hours (dlh). The total indirect labor is budgeted to be $344,700. Time records from indirect labor employees revealed that they spent 20% of their time setting up production runs and 80% of their time supporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: Number of Setups Direct Labor Hours Units Cell phones 550 2,055 91,480 Tablet PCs 1,230 1,775 82,690 Total 1,780 3,830 174,170 Required: Complete the Activity Tables for cell phones and tablets: a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. If required, round all per-unit answers to the nearest cent. Complete the Activity Tables for cell phones and tablets: b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities—one for setup and the other for production support.* c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.* d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)? * If required, round all per-unit answers to the nearest cent and other answers to the nearest dollar.

Answer 1

Estimate direct labor hours		3830hrs
Total indirect labor budget		$344700
Set up time		20%
actual production		80%
	No of setups	Direct Labor hrs	Units
Cell Phones	550	2055	91480
Tablet PC's	1230	1775	82690
	1780	3830	174170
a. Indirect labor cost
	Total	Set up time	Actual production
Labor cost	344700	68940	275760
Units		1780	3830
per unit		38.730337	72
Cellphones		=550*38.73	=2055*72
	169261.5	21301.5	147960
No of units	91480
per unit	1.85
Tablet PC		=1230*38.73	=1775*72
	175437.9	47637.9	127800
No of units	82690
per unit	2.12