Cabigas Corporation Manufactures Two Products, Product C and Product D

Essay

Cabigas Corporation manufactures two products, Product C and Product D. The company estimated it would incur $167,140 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period's operations appear below:
$\begin{array}{lrr} &{\text { Product C }} & \text { Product } D \\\text { Estimated volume } & 2,000 \text { units } & 2,700 \text { units } \\\text { Direct labor-hours per unit } & 2.00 \text { hours } & 0.80 \text { hour } \\\text { Direct materials cost per unit } & \$ 21.50& \$ 24.10 \\\text { Direct labor cost per unit } & \$ 24.00& \$ 9.60\end{array}$ Required:
a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year.
b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:
Determine the unit product cost of each product for the current period using the activity-based costing approach. General factory overhead is allocated based on direct labor-hours.