(Solved by Humans)-Problem 18-54 PLANTWIDE VERSUS DEPARTMENTAL RATES, PRODUCT- COSTING ACCURACY: ACTIVITY-BASED...

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Problem 18-54 PLANTWIDE VERSUS DEPARTMENTAL RATES, PRODUCT- COSTING ACCURACY: ACTIVITY-BASED COSTING Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor- intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products: Product Data     Model A Model B   Units produced per year   30,000 300,000   Prime costs   $100,000 $1,000,000   Direct labor hours   140,000 300,000   Machine hours   20,000 200,000   Production runs   40 60   Inspection hours   800 1,200   Maintenance hours   10,000 90,000   Overhead costs:         Setup costs   $180,000     Inspection costs   140,000     Machining   160,000     Maintenance     180,000     Total   $660,000     Required:         1.    Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. Round to two decimal places. 2.    Compute the overhead cost per unit for each product by using ABC. Round to two decimal places. 3.    Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $2.33 per machine hour and Department 2 (labor intensive) with a rate of $0.60 per direct labor hour. The consumption of these two drivers is as follows:     Department 1 Machine Hours Department 2 Direct Labor Hours Model A 10,000 30,000 Model B 170,000 270,000   Compute the overhead cost per unit for each product by using departmental rates. Round to two decimal places. 4.     Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. (Did the departmen- tal rates do better than the plantwide rate?)