Lumins, Inc

Multiple Choice

Lumins, Inc. is a manufacturer of fine quality lamps and currently offers two kinds: floor lamps and desk lamps. Each floor lamp needs 2 direct labor hours and 3 pounds of direct materials while each desk lamp needs 1.5 direct labor hours and 1.75 pounds of direct materials. They currently utilize a traditional costing system, but management has recently established an exploratory committee to investigate whether a switch to Activity-Based Costing (ABC) might be beneficial. Their key activities are as follows: Machining, $22.78 per machining hour; Factory Utilities, $3.77 per square foot; and Supervisor Wages, $13.42 per hour. Lumins has gathered the following information about production and related costs:
Under a traditional costing system, Manufacturing Overhead (MOH) is estimated at 90% of the direct labor costs. What is the per-unit cost for desk lamps under a traditional costing system? What is the per-unit cost for desk lamps under ABC? (Do not round intermediate calculations.)

A) Traditional, $9.15; ABC, $19.05
B) Traditional, $13.59; ABC, $17.28
C) Traditional, $17.28; ABC, $13.59
D) Traditional, $19.05; ABC, $9.15