Ram Industries produces two products in its Windsor, CO plant: X5 and Y12. For the coming year, budgeted production of X5 is 100,000 units and of Y12 is 80,000 units. Expected costs and activity are as follows:
Dir Mat Dir Labor MachHrs Setups Parts*
X5 $700,000 $1,600,000 18,000 120 10
Y12 $1,000,000 $2,400,000 32,000 280 20
* number of unique parts for this model
Factory overhead is expected to be $7,000,000.
- Assume that Ram uses a traditional costing system with a single plant-wide overhead pool allocated on the basis of direct labor cost. Determine the total budgeted cost per unit of the two products. Show your calculations.
- Assume instead that Ram uses an ABC system with three cost drivers: machine hours, setups, and number of unique parts. The budgeted amounts of the three cost pools are:
Machine Hours $4,000,000
Parts $ 900,000
Determine the cost per unit under the ABC system.