Sturdivant Fasteners, Co Compute the Cost Per Unit Using: the Traditional Two-Stage Allocation

Essay

Sturdivant Fasteners, Co. uses a traditional allocation of overhead based on direct labor hours system. The manager has accumulated the following information on engineering changes, which are indirect cost of their products, for two of the company's major products:
$$\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Automotive } \\\text { Fasteners }\end{array} & \begin{array} { c } \text { Computer } \\\text { Fasteners }\end{array} \\\hline \text { Total units produced } & 5,000 & 2,500 \\\hline \text { Cost per engineering change } & \$ 400 & \$ 400 \\\hline \text { Number of engineering changes } & 5 & 25 \\\hline \text { Direct labor hours per unit } & 4 & 4 \\\hline\end{array}$$ Compute the cost per unit using: The traditional two-stage allocation of the costs of engineering changes based on direct labor hours.