High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the customers store brand names.

High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold

under the customers store brand names. The accounting department has identified the following

overhead costs and cost drivers for the next year:

Overhead Item

Expected Costs

Cost Driver

Maximum Quantity

Setup costs……………………$936,000

Number of Setups…………………..7200

Ordering costs…..…………….$240,000

Number of orders…………..………60,000

Maintenance…………………..$1,200,000

Number of machine hours……..80,000

Power………………………………$120,000

Number of kilowatt

hours……….600,000

Total predicted direct labor hours for next year is 60,000. The following data are for tow recently

completed jobs:

Job 201

Job 202

Cost of Direct Materials

$13,500

$15,000

Cost of Direct Labor

$19,125

$71,250

Number of units completed

1,125

915

Number of direct labor hours

270

330

Number of setups

18

22

Number of orders

24

45

Number of machine hours

540

450

Number of kilowatt hours

270

360

Required:

a) Determine the unit cost for each job using a traditional plantwide overhead rate based on

direct labor hours

b) Determine the unit cost for each job using ABC (Round answers to two decimal places).

c) As the manger of High Country, is there additional information that you would want to

help you evaluate the pricing and profitability of Jobs 201 and 202?

d) Assuming the company has been using the method required in part a, how should

management react to the finding in part b?