Classic Shipping Industries has two products branded Red and green. It uses activity-based costing. The...
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Classic Shipping Industries has two products branded Red and green. It uses activity-based costing. The direct material cost per unit and the direct labor cost per unit is exactly the same for the two products. At Classic, managers compute product costs using estimated overheads. Overheads result from two primary activities: Setup and Freight Loading. Total estimated setup costs equal $300,000; and total estimated freight loading costs equal $300,000 as well. The cost driver for the two activities is respectively the number of setups and the number of loadings.
Red
Green
Total units manufactured
45,000
45,000
Units processed with each setup
2,250
1,500
Units shipped with each loading
900
1,500
What is the overhead cost allocated to each unit of Red? What is the overhead cost allocated to each unit of Green?
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