Printware Products, Inc. Produces Printers For Wholesale Distributors.

P4-2 Printware Products, Inc. produces printers for wholesale distributors. It has just completed packaging an order from Hawes Company for 450 printers. Before the order is shipped, the controller wants to compare the unit costs computed under the company’s new activity-based costing system with the unit costs computed under its traditional costing system. Printware’s traditional costing system assigned overhead costs at a rate of 240 percent of direct labor cost. Data for the Hawes order are as follows: direct materials, $17,552, purchased parts, $14,856, direct labor hours, 140, and average direct labor pay rate per hour, $17. Data for activity-based costing related to processing direct materials and purchased parts for the Hawes order follow. Activity Cost Driver Activity Cost Rate Activity UsageEngineering systems design Engineering hours $ 28 per engineering hour 18 engineering hoursSetup Number of setups $ 36 per setup 12 setupsParts production Machine hours $ 37 per machine hour 82 machine hoursProduct assembly Assembly hours $ 42 per assembly hour 96 assembly hoursPackaging Number of packages $ 5. 60 per package 150 packagesBuilding occupancy Machine hours $ 10 per machine hour 82 machine hoursRequiredIf required, round the per unit answers to the nearest cent. 1. Use the traditional costing approach to compute the total cost and the product unit cost of the Hawes order. Total cost $Product unit cost $2. Using the cost hierarchy, identify each activity as unit level, batch level, product level, or facility level. Engineering systems design Setup Parts production Product assembly Packaging Building occupancy 3. Prepare a bill of activities for the activity costs. Printware Products, Inc. Bill of ActivitiesHawes OrderActivity Activity Cost Rate Cost Driver Level Activity CostUnit levelParts production $ per machine hour machine hours $Product assembly $ per assembly hour assembly hours Packaging $ per package packages Batch levelSetup $ per setup setups Product levelEngineering systems design $ per engineering hour engineering hours Facility levelBuilding occupancy $ per machine hour machine hours Total activity costs assigned to job $Total units of job Activity costs per unit $4. Use ABC to compute the total cost and product unit cost of the Hawes order. Cost summaryDirect materials $Purchased parts Activity costs Total cost of order $Product unit cost $5. What is the difference between the product unit cost you computed using the traditional approach and the one you computed using ABC?

Originally posted 2018-07-17 03:55:17. Republished by Blog Post Promoter

Printware Products, Inc. produces printers for wholesale distributors.

P4-2 Printware Products, Inc. produces printers for wholesale distributors. It has just completed packaging an order from Hawes Company for 450 printers. Before the order is shipped, the controller wants to compare the unit costs computed under the company’s new activity-based costing system with the unit costs computed under its traditional costing system. Printware’s traditional costing system assigned overhead costs at a rate of 240 percent of direct labor cost.

Data for the Hawes order are as follows: direct materials, $17,552; purchased parts, $14,856; direct labor hours, 140; and average direct labor pay rate per hour, $17.

Data for activity-based costing related to processing direct materials and purchased parts for the Hawes order follow.

Activity Cost Driver Activity Cost Rate Activity Usage

Engineering systems design Engineering hours $ 28 per engineering hour 18 engineering hours

Setup Number of setups $ 36 per setup 12 setups

Parts production Machine hours $ 37 per machine hour 82 machine hours

Product assembly Assembly hours $ 42 per assembly hour 96 assembly hours

Packaging Number of packages $ 5.60 per package 150 packages

Building occupancy Machine hours $ 10 per machine hour 82 machine hours

Required

If required, round the per unit answers to the nearest cent.

1. Use the traditional costing approach to compute the total cost and the product unit cost of the Hawes order.

Total cost $

Product unit cost $

2. Using the cost hierarchy, identify each activity as unit level, batch level, product level, or facility level.

Engineering systems design

Setup

Parts production

Product assembly

Packaging

Building occupancy

3. Prepare a bill of activities for the activity costs.

Printware Products, Inc.

Bill of Activities

Hawes Order

Activity Activity Cost Rate Cost Driver Level Activity Cost

Unit level

Parts production $ per machine hour machine hours $

Product assembly $ per assembly hour assembly hours

Packaging $ per package packages

Batch level

Setup $ per setup setups

Product level

Engineering systems design $ per engineering hour engineering hours

Facility level

Building occupancy $ per machine hour machine hours

Total activity costs assigned to job $

Total units of job

Activity costs per unit $

4. Use ABC to compute the total cost and product unit cost of the Hawes order.

Cost summary

Direct materials $

Purchased parts

Activity costs

Total cost of order $

Product unit cost $

5. What is the difference between the product unit cost you computed using the traditional approach and the one you computed using ABC?