Torri Manufacturing Corporation Has a Traditional Costing System in Which

Essay

Torri Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs).The company has two products,B40W and C63J,about which it has provided the following data:
$\begin{array}{|l|r|r|}\hline & \text { B40W } & \text { C63 } \\\hline \text { Direct materials per unit } & \$ 34.90 & \$ 63.70 \\\hline \text { Direct labour per unit } & \$ 20.80 & \$ 62.40 \\\hline \text { Direct labour hours per unit } & 0.80 & 2.40 \\\hline \text { Annual production } & 35,000 & 15,000 \\\hline\end{array}$

The company's estimated total manufacturing overhead for the year is $2,656,000 and the company's estimated total direct labour-hours for the year is 64,000.
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:
$$\begin{array} { | l | r | } \hline \text { Activities and Activity Measures } & \text { Estimated Overhead Cost } \\\hline \text { Assembling products (DLHs) } & \$ 1,216,000 \\\hline \text { Preparing batches (batches) } & 480,000 \\\hline \text { Milling (MHs) } & \$ 960,000 \\\hline \text { Total } & \$ 2,656,000 \\\hline\end{array}$$
$$\begin{array} { | l | r | r | r | } \hline \text { Activities } & \text { B40W } & \text { C63J } & \text { Total } \\\hline \text { Assembling products } & 28,000 & 36,000 & 64,000 \\\hline \text { Preparing batches } & 2,304 & 2,496 & 4,800 \\\hline \text { Milling } & 1,088 & 2,112 & 3,200 \\\hline\end{array}$$
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.