JamMaster Audio Corporation Has a Traditional Costing System in Which

Essay

JamMaster Audio Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Boom and Wow, about which it has provided the following data:
$$\begin{array} { l r r r r } & \text { Boom } & { \text { Wow } } \\\text { Direct materials per unit } & \$14.90& \$ 44.30 \\\text { Direct labor per unit } & \$ 4.20 & \$2 5 . 2 0 \\\text { Direct labor-hours per unit } & 0.20 & 1.20 \\\text { Annulual production } & 40,000 & 15,000\end{array}$$
The company's estimated total manufacturing overhead for the year is $1,809,600 and the company's estimated total direct labor-hours for the year is 26,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
$$\begin{array} { l c } { \text { Activities arid Activity Measires } } & \text { Estirnated Overhead Cost } \\\text { Assembling products (DLHs) } & \$ 702,000 \\\text { Preparing batches (batches) } & 132,600 \\\text { Erigrave (MHs) } & \underline{ 975,000} \\\text { Total } & \underline{\$ 1,809,600}\end{array}$$
$$\begin{array} { | l | r | r | r | } \hline \text { Activities } & \text { Bomm } & \text { Wow } & \text { Total } \\\hline \text { Assernbling products } &8 , 0 0 0 & 18,000 & 26,000 \\\hline \text { Preparing batches } & 884 & 442 & 1,326 \\\hline \text { Engerave } & 702 & 1,248 & 1,950 \\\hline\end{array}$$
Required:
a. Determine the unit product cost of each of the company's two products under the traditional costing system.
b. Determine the unit product cost of each of the company's two products under activity-based costing system.