VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. The deluxe model is a multi-format progressive-scan DVD player with networking capability, Dolby digital, and DTS decoder. The standard model’s primary feature is progressive-scan. Annual production is 50,000 units for the deluxe and 20,000 units for the standard. Both products require 2 hours of direct labor for completion. Therefore, total annual direct labor hours are 140,000 [2 hrs. _ (20,000 _ 50,000)]. Expected annual manufacturing overhead is \$1,050,000. Thus, the predetermined overhead rate is \$7.50 (\$1,050,000 _ 140,000) per direct labor hour. The direct materials cost per unit is \$42 for the deluxe model and \$11 for the standard model. The direct labor cost is \$18 per unit for both the
deluxe and the standard models. The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.
Expected
Use of
Expected Use of
Estimated
Cost
Drivers by Product
Activity Cost Pool
Cost Driver
Drivers
Standard
Deluxe
Orders
\$ 126,000
400
100
300
Receiving
Pounds
30,000
20,000
4,000
16,000
Assembling
Number of parts
444,000
74,000
20,000
54,000
Testing
Number of tests
115,000
23,000
10,000
13,000
Finishing
Units
140,000
70,000
20,000
50,000
Packing and shipping
Pounds
195,000
80,000
18,000
62,000
\$1,050,000
Instructions
(a) Under traditional product costing, compute the total unit cost of both products. Prepare a simple comparative schedule of the individual costs by product (similar to Illustration 17-10 on page 896).
(b) Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).
(c) Prepare a schedule assigning each activity’s overhead cost pool to each product based on the use of cost drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.)
(d) Compute the total cost per unit for each product under ABC.
(e) Classify each of the activities as a value-added activity or a nonâ€“value-added activity.
(f) Comment on (1) the comparative overhead cost per unit for the two products under ABC, and (2) the comparative total costs per unit under traditional costing and ABC.

VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. The deluxe model is a multi-format progressive-scan DVD player with networking capability, Dolby digital, and DTS decoder. The standard model’s primary feature is progressive-scan. Annual production is 50,000 units for the deluxe and 20,000 units for the standard. Both products require 2 hours of direct labor for completion. Therefore, total annual direct labor hours are 140,000 [2 hrs. _ (20,000 _ 50,000)]. Expected annual manufacturing overhead is \$1,050,000. Thus, the predetermined overhead rate is \$7.50 (\$1,050,000 _ 140,000) per direct labor hour. The direct materials cost per unit is \$42 for the deluxe model and \$11 for the standard model. The direct labor cost is \$18 per unit for both the
deluxe and the standard models. The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.
Expected
Use of
Expected Use of
Estimated
Cost
Drivers by Product
Activity Cost Pool
Cost Driver
Drivers
Standard
Deluxe
Orders
\$ 126,000
400
100
300
Receiving
Pounds
30,000
20,000
4,000
16,000
Assembling
Number of parts
444,000
74,000
20,000
54,000
Testing
Number of tests
115,000
23,000
10,000
13,000
Finishing
Units
140,000
70,000
20,000
50,000
Packing and shipping
Pounds
195,000
80,000
18,000
62,000
\$1,050,000
Instructions
(a) Under traditional product costing, compute the total unit cost of both products. Prepare a simple comparative schedule of the individual costs by product (similar to Illustration 17-10 on page 896).
(b) Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).
(c) Prepare a schedule assigning each activity’s overhead cost pool to each product based on the use of cost drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.)
(d) Compute the total cost per unit for each product under ABC.
(e) Classify each of the activities as a value-added activity or a nonâ€“value-added activity.
(f) Comment on (1) the comparative overhead cost per unit for the two products under ABC, and (2) the comparative total costs per unit under traditional costing and ABC.