Swannee Company Manufactures Two Products, Product a and Product B

Essay

Swannee Company manufactures two products, Product A and Product B. The company estimated it would incur $160,790 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:
$\begin{array}{lcc}&\text { Product A }&\text { Product B }\\\text { Estimated volume } & 3,400 \text {units } & 4,800 \text { units } \\\text { Direct labor-hours per unit } & 1.40 \text { hour } & 1.90 \text { hours } \\\text { Direct materials cost per unit } & \$ 7.40 & \$ 12.70 \\\text { Direct labor cost per unit } & \$ 14.00& \$ 19.00\end{array}$
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.