Which of the following statements concerning the unit product cost of Product W7 is true?

A) The unit product cost of Product W7 under traditional costing is greater than its unit product under activity-based costing by $244.36.
B) The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $66.13.
C) The unit product cost of Product W7 under traditional costing is greater than its unit product under activity-based costing by $66.13.
D) The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $244.36.

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Megan Chavis · Accepted Answer

Final Answer : D, Explanation :  In the table provided in the question, it can be seen that the unit product cost of Product W7 under traditional costing is $353.59 and under activity-based costing is $97.23. Therefore, the difference between the two costs is $353.59 - $97.23 = $256.36. Since the question specifically asks for the difference in the opposite direction (i.e. activity-based costing minus traditional costing), we need to subtract this amount from zero to get the correct answer. Thus, the unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $256.36, which is closest to option D ($244.36 is not a choice). Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours= $533,540 ÷ 5,800 DLHs = $91.99 per DLH (rounded)Computation of traditional unit product cost:   Computation of activity rates:   Computation of the overhead cost per unit under activity-based costing.   Computation of unit product cost under activity-based costing.   The difference in unit product costs is:   The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $244.36.Reference: CH04-Ref22Mckenny, Inc., manufactures and sells two products: Product P9 and Product X2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:   The direct labor rate is $28.20 per DLH.The direct materials cost per unit is $140.60 for Product P9 and $107.50 for Product X2.The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

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