Question

Chang Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Plain and Fancy, about which it has provided the following data: Direct materials per unit Direct labor per unit Direct labor-hours per unit Annual production Plain $ 24.50 $ 5.00 0.20 45,000 Fancy $ 59.30 $ 25.00 1.00 15,000 The company's estimated total manufacturing overhead for the year is $985,440 and the company's estimated total direct labor-hours for the year is 24,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Activities and Activity Measures Supporting direct labor (DLHS) Setting up machines (setups) Parts administration (part types)! Total Estimated Overhead Cost $384,000 255,840 345,600 $985, 440 Expected Activity Plain Fancy Total 9,000 15,000 24,000 DLHS

Answer 1

Activity and activity measures	Estimated overhead cost (a)	Expected total activity (b)	Activity rates (a/b)
Supporting direct labor (DLHs)	384000	24000	16
Setting up machines (setups)	255840	1968	130
Parts administration (part types)	345600	864	400

Overhead allocation :	Fancy
Supporting direct labor ( 16 * 15000 )	240000
Setting up machine ( 130 * 936 )	121680
Parts administration ( 400 * 240 )	96000
Total overhead allocated	457680
(/) Annual production	15000
Overhead per unit	30.51