Question

HOW DO I CALCULATE?

Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced Direct labor cost (@ $28 per DLH) Direct materials cost Product A 11,000 units 0.12 DLH per unit $ 1.60 per unit Product B 1,100 units 0.28 DLH per unit $ 2.90 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $ 11,032 55,000 87,000 $ 153,032

Answer 1

1)Total direct labor hours:

Product A	11000*.12=1320
product B	1100 * .28= 308
Total estimated direct labor hours	1628

Predetermined overhead rate = Estimated overhead /estimated Direct labor hour

                       = 153032/1628

                        = $ 94 per direct labor hour

Product	Activity driver	plant-wide overhead rate	Total overhead cost	unit produced	OH cost per unit
A	1320	94	124080	11000	124080/11000=11.28
B	308	94	28952	1100	28952/1100= 26.32

	A	B
Direct material cost	1.6	2.9
Direct labor cost	28*.12=3.36	28*.28=7.84
overhead cost	11.28	26.32
Product cost per unit	16.24	37.06

2)

	A	B
Market price	21.36	59
Product cost per unit	16.24	37.06
Profit /(loss) per unit	5.12	21.94

3)

Machine setup	Total overhead cost for machine setup /Total number of setup 11032/31 355.87 per setup
Materials handling	Total overhead cost for material handling /Total number of parts 55000/70400 = .78125 per parts
Quality control	Total overhead cost for quality control /Total number of inspection hours 87000/290 =$ 300 per inspection hours

Total set up =9+22=31

Total parts required = (6*11000)product A + (4*1100 )product B

                    = 66000 + 4400

                      = 70400 parts

Total inspection hours= 60+230=290

overhead assigned	Activity driver	Activity rate	Total overhead cost
Product A
Machine setup	9	355.87	3202.83
material handling	66000	.78125	51562.5
quality control	60	300	18000
Total overhead cost			72765.33
Number of units			11000
overhead cost per unit			6.62

overhead assigned	Activity driver	Activity rate	Total overhead cost
Product B
Machine setup	22	355.87	7829.14
material handling	4400	.78125	3437.5
quality control	230	300	69000
Total overhead cost			80266.64
Number of units			1100
overhead cost per unit			72.97

	A	B
Direct material cost	1.6	2.9
Direct labor cost	28*.12=3.36	7.84
overhead cost	6.62	72.97
Product cost per unit	11.58	83.71

4)

	A	B
Market price	21.36	59
Product cost per unit	(11.58)	(83.71)
Profit /(loss) per unit	9.78	-24.71