Predetermined rate under traditional allocation method

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Label your answers and put them in final form as appropriate. Ramses Manufacturing manufactures several products. Ramses has adopted the traditional overhead allocation method for allocating manufacturing overhead, and direct labor hours have been selected as the cost driver. Ramses budgeted the production for 15,000 units for 2012 with budgeted total direct labor hours of 6,000 hours at a standard wage rate of $20 per hour, and total manufacturing overheads at $263,100. Mr. Tiger Smith, CFO of Ramses, is considering switching to the activity-based costing (ABC) system due to several significant changes in its production process. Information pertained to ABC for the year is presented as follows: Cost pools Total costs Total activity Assembly $153,000 12,750 machine hours Material handling 94,500 5,250 orders Inspection 15,600 1,560 inspection hours Ramses received an order of 1,000 units of one of its several product lines, Frammis (referred to as Job101). The following data are related to the production and sales of these Frammises: Machine hours 1,400 Material handling-orders 400 Inspection hours 170 Direct materials cost per unit $120 Direct labor hours 300 Required: 1. Calculate the predetermined rate under the traditional allocation method. 2. Calculate the total product costs and unit costs under the traditional allocation method for Job101. 3. Calculate the activity cost pool rates for each of its activity cost pools listed. 4. Calculate the total product costs and unit costs under the ABC method for Job101. 5. Which method is more preferable? Why (give at least two reasons)?

Reference no: EM131438211

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