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    Comparing costs using ABC with the plantwide overhead rate

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    The following data are for the two products produced by Aplan Company.

    Product A Product B
    Direct materials $ 15 per unit $ 24 per unit
    Direct labor hours 0.3 DLH per unit 1.6 DLH per unit
    Machine hours 0.1 MH per unit 1.2 MH per unit
    Batches 125 batches 225 batches
    Volume 10,000 units 2,000 units
    Engineering modifications 12 modifications 58 modifications
    Number of customers 500 customers 400 customers
    Market price $ 30 per unit $ 120 per unit

    The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

    Costs Driver
    Indirect manufacturing
    Engineering support $ 24,500 Engineering modifications
    Electricity 34,000 Machine hours
    Setup costs 52,500 Batches
    Nonmanufacturing
    Customer service 81,000 Number of customers

    Requirement 1:
    Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. What is the gross profit per unit?

    2. How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?

    3.Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?

    4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate?

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    https://brainmass.com/business/accounting/comparing-costs-using-abc-with-the-plantwide-overhead-rate-398803

    Solution Summary

    The solution compares costs using ABC with the plantwide overhead rate

    $2.19

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