Question

Coudriet Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, P93S and N40S, about which it has provided the following data:

	P93S			N40S
Direct materials per unit	$	21.90		$	54.80
Direct labor per unit	$	8.80		$	13.20
Direct labor-hours per unit		0.80			1.20
Annual production (units)		35,000			15,000

The company's estimated total manufacturing overhead for the year is $2,172,580 and the company's estimated total direct labor-hours for the year is 46,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

Activities and Activity Measures	Estimated Overhead Cost
Direct labor support (DLHs)	$	552,000
Setting up machines (setups)		419,980
Part administration (part types)		1,200,600
Total	$	2,172,580

	Expected Activity
	P93S	N40S	Total
DLHs	28,000	18,000	46,000
Setups	2,162	1,656	3,818
Part types	1,886	2,116	4,002

The unit product cost of product P93S under the company's traditional costing system is closest to:

Multiple Choice

$63.26

$68.48

$30.70

$40.30

Answer 1

	P93S
Direct Materials per unit	$21.90
Direct Labor per unit	$8.80
Direct labor hours per unit	$37.78
Unit Product Cost	$68.48

Explanation:

Manufacturing overhead rate = $2,172,580 / 46,000

                                          = $47.23 per Direct labor hour

Direct labor hours per unit = 0.8 * $47.23 = $37.78