Enemia Company uses an overhead costing system based on directlabor hours for its two products A and B. The company isconsidering adopting an activity-based costing system, and collectsthe following information for the month of October.
Product A Product B
Production units 12,000 6,000
Direct materials cost per unit $50.00 $40.00
Direct labor cost per hour $12.00 $12.00
Direct labor hours 30,000 10,000
Overhead Overhead Total Activity Consumption
Cost pool cost activity Product A Product B
Machine setup $120,000 600 setups 200 400
Engineering change order $110,000 220 orders 120100
Facility rent $120,000 2,000 sq. feet 1300 700
Required:
(1) Compute the unit manufacturing cost of each product under avolume-based costing system based on direct labor hours.
(2) Compute the unit manufacturing cost of each product underthe activity-based costing system.
