Comment on the accuracy of the two methods for determining costs.

Calculating Activity-based Costing Overhead RatesAssume that manufacturing overhead for Glassman Company in the previous exercise consisted of the following activities and costs:Setup (1,000 setup hours) $144,000Production scheduling (400 batches) 60,000Production engineering (60 change orders) 120,000Supervision (2,000 direct labor hours) 56,000Machine maintenance (12,000 machine hours) 84,000Total activity costs $464,000The following additional data were provided for Job 845:Direct materials costs $7,000Direct labor cost (5 Milling direct labor hours;35 Finishing direct labor hours) $1000Setup hours 5 hoursProduction scheduling 1 batchMachine hours used (25 Milling machine hours;5 Finishing machine hours 30 hoursProduction engineering 3 change ordersCalculate the cost per unit of activity driver for each activity cost category.Calculate the cost of Job 845 using ABC to assign the overhead costs.Calculate the cost of Job 845 using the plantwide overhead rate based on machine hours calculated in the previous exercise.Calculate the cost of Job 845 using the machine hour departmental overhead rate for the Milling Department and a direct labor hour overhead rate for the Finishing Department.E18-24Traditional Product Costing versus Activity Based CostingAssume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $204,000 consisting of the following activity cost pools for the month.Activity Center Activity Costs Cost Driver Activity LevelAssembly setup $45,000 Setup hours 1,500Material Handling 15,000 Number of moves 300Assembly 120,000 Assembly hours 12,000Maintenance 24,000 Maintenance hours 1,200Total $204,000Total direct labor hours used during the month were 8,000. Panasonic produced many different electronic products, including the following two products produced during the current month: Model x301 Modelz205 Units produced 1,000 1,000 Direct material cost $15,000 $15,000 Direct Labor Cost $12,500 $12,500 Direct Labor hours 500 500 Setup hours 50 100 Material moves 25 50 Assembly hours 800 800 Maintenance hours 10 40a. Calculate the total cost per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.c. Comment on the accuracy of the two methods for determining costs.d. Discuss some of the strategic implications of your answers to the previous requirements.


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