Question

Rondeau, Inc., manufactures and sells two products: Product V9 and Product M6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product V9 660 12.6 8,316 Product M6 760 9.6 7,296 Total direct labor-hours 15,612 The direct labor rate is $27.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product V9 $291.60 Product M6 $184.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product V9 Product M6 Total Labor-related DLHs $ 103,656 8,316 7,296 15,612 Product testing Tests 76,808 1,140 1,520 2,660 Order size MHs 402,000 5,700 5,040 10,740 $ 582,464 Required: Calculate the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products. (Round your intermediate calculations and final answers to 2 decimal places. Enter your answers as positive values.)

Answer 1

Solution:

Expected Production   Direct Labor-Hours Per Unit   Total Direct Labor-Hours

  660                                          12.6                                   8,316

  760                                            9.6                                  7,296

Total directlabor-hours                                                       15,612

The company has an activity-based costing system with the following activity cost pools,activity measures, and expected activity:

                                                         Estimated       Expected Activity

Activity            Activity       Overhead   Product V9    Product M6    Total

CostPools      Measures      Cost

Labor-related    DLHs         $234,168           2,500         6,300        8,800

Machine setups setups       13,800                 300          200            500

General factory  MHs           112,423           3,100          3,000         6,100

                                            $360,391