80.2K

Verified Solution

Link Copied!

This is all one question.

Question 1: Inter Industries manufactures two products: A and B A review of the company's accounting records revealed the following per-unit costs and production volumes: 2500 5000 $40 Production Volume (units) Direct Material Direct Labor: 2 hours at $12 3 hours at $12 Manufacturing Overhead: 2 hours at $93 3 hours at $93 186 279 Manufacturing overhead is currently computed by spreading overhead of $1,860,000 over 20,000 direct labor hours. Management is considering a shift to activity-based costing in an effort to improve the firm's accounting procedures, and the following data are available: Cost Pool Cost Cost Driver Cost Driver Volume A B Total Setups General Factory Machine processing $240,000 1,500,000 120,000 # of setups Direct Labor hrs Machine hrs 100 20 120 5,000 15,000 20,000 2,200 800 3,000 Inter determines selling prices by adding 40% to a product's total cost. Required: A. Compute the per-unit cost and selling price of product B by using Inter's current costing procedures. B. Compute the per-unit overhead cost of product B if the company switches to activity-based costing. C. Compute B's total per-unit cost and selling price under activity-based costing. D. Inter has recently encountered significant international competition for product B, with considerable business being lost to very aggressive suppliers. Will activity- based costing allow the company to be more competitive with product B from a price perspective? Briefly explain. E. Will the cost and selling price of product A likely increase or decrease if Inter changes to activity-based costing? Why? Hint: No calculations are necessary

Answer & Explanation Solved by verified expert

See Answer