Tulip Company produces two products, T and U. The indirect labor costs include the following two items: Plant supervision $ 700,000 Setup labor (indirect) 300,000 Total indirect labor $1,000,000 The following activity-base usage and unit production information is available for the two products: Number of Setups Direct Labor Hours Units Product T 200 20,000 900 Product U 200 30,000 1,100 Total 400 50,000 2,000
(a) Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.
(b) Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate.
(c) Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup is number of setups.
(d) Determine the factory overhead cost per unit for Products T and U, using activity-based costing.
(e) Why is the factory overhead cost per unit different for the two products under the two methods?