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Answer :
To compute the unit costs for both the standard and premium products using the current costing system at Benton, we need to use direct labor costs as the allocation basis for overhead. The equation for this is:
Unit cost = Direct Materials + Direct Labor + Overhead Costs
Where overhead costs = (Direct Labor Cost / Total Direct Labor Hours) x Total Overhead Costs
To compute the unit costs for both the standard and premium products using the proposed ABC system at Benton, we need to use the cost of each activity as the allocation basis for overhead. The equation for this is:
Unit cost = Direct Materials + Direct Labor + Overhead Costs
Where overhead costs = (Cost of each activity / Total Cost of all activities) x Total Overhead Costs
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