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: $$\begin{array} { | l | r | r | } \hline & \text { Boom } & \text { Wow } \\\hline \text { Direct materials per unit } & \$ 14.90 & \$ 44.30 \\\hline \text { Direct labor per unit } & \$ 4.20 & \$ 25.20 \\\hline \text { Direct labor-hours per unit } & 0.20 & 1.20 \\\hline \text { Annual production } & 40,000 & 15,000 \\\hline\end{array}$$
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:
$\begin{array}{|l|r|}\hline \text { Activities and Activity } & \text { Estimated Owerhead } \\\text { Measures } & \text { Cost } \\\text { Assembling products (DLHs) } & \$ 702,000 \\\hline \text { Preparing batches (batches) } & 132,600 \\\hline \text { Engrave (wHs) } & 975,000 \\\hline \text { Total } &\underline{ \$ 1,809,600} \\\hline\end{array}$
$$\begin{array} { | l | r | r | r | } \hline \text { Acturities } & \text { Boom } & \text { Wow } & \text { Total } \\\hline \begin{array} { l } \text { Assembling } \\\text { products }\end{array} & 8,000 & 18,000 & 26,000 \\\hline \begin{array} { l } \text { Preparing } \\\text { batches }\end{array} & 884 & 442 & 1,326 \\\hline \text { Engrave } & 702 & 1,248 & 1,950 \\\hline\end{array}$$
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.