Question

Eliezrie, Inc., manufactures and sells two products: Product G8 and Product O0. 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 G8 800 6.0 4,800 Product O0 400 3.0 1,200 Total direct labor-hours 6,000 The direct labor rate is $23.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G8 $123.10 Product O0 $123.50 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 G8 Product O0 Total Labor-related DLHs $ 60,555 4,800 1,200 6,000 Machine setups setups 59,390 900 650 1,550 Order size MHs 370,508 5,300 6,100 11,400 $ 490,453 Which of the following statements concerning the unit product cost of Product G8 is true? (Round your intermediate calculations to 2 decimal places.) Multiple Choice A.The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $171.48. B.The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $171.48. C. The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $291.56. D. The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $291.56.

Answer 1

Answer:

A.The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $171.48.

Explanation:

In the given problem, the unit cost if we consider the traditional method of costing is estimated as $752.14. Furthermore, the unit cost if we consider the activity-based method of costing is approximately $580.58. Therefore, we we subtract the two values from each other, we have:

$752.14 - $580.68 = $171.46

This is close to the value in option A.