(Appendix 7A)Werger Manufacturing Corporation Has a Traditional Costing System in Which

question 29

Essay

(Appendix 7A)Werger Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs).The company has two products,W82R and L48S,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,521,960 and the company's estimated total direct labour-hours for the year is 22,000.
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:

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.

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Definitions:

Lessor

A lessor is the party that leases or rents a property or asset to another party, known as the lessee.

Capital Lease

A lease arrangement that is recorded as an asset on the lessee's balance sheet, essentially treated as a purchase of the leased asset for accounting purposes.

Transfer of Ownership

The act of passing the legal title of an asset from one entity or individual to another.