Step-Up Corporation Manufactures Two Small Step Ladders,Regular and Deluxe

Essay

Step-Up Corporation manufactures two small step ladders,Regular and Deluxe.Deluxe ladders were added as a product line three years ago.Deluxe ladders are the more complex of the two products as they are extendable,requiring one hour of direct labour time per unit to manufacture,compared to one-half hours of direct labour time for Regular ladder.
Indirect costs are currently allocated to the products on the basis of direct labour hours.The company estimated it would incur $332,500 in manufacturing overhead costs and produce 6,000 units of Deluxe ladders and 20,000 units of Regular ladders during the current year.
Unit costs for materials and direct labour are:

Indirect costs are:

Required:
a.Determine the unit cost of the two products using traditional costing with units as the allocation base.
b.Determine the unit cost of the two products using activity-based costing.