Question

Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant: Deluxe Regular Quantity 100,000 800,000 Selling price $900 $750 Unit prime cost $529 $483 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity Name Activity Driver Deluxe Activity Cost Regular 200 Setups Number of setups 300 $1,800,000 Machining Machine hours 100,000 300,000 80,000,000 Engineering Engineering hours 50,000 100,000 10,500,000 Packing Packing orders 100,000 400,000 400,000 Required: 1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent. Setups per setup Machining per machine hour per engineering hour Engineering $ Packing per packing order 2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar. Deluxe per unit Regulars per unit

Answer 1

Requirement 1

	Activity rate
Setups	$       3,600.00	Per setup
Machining	$          200.00	Per machine hour
Engineering	$             70.00	Per Engineering hour
Packing	$               0.80	Per Packing order

Requirement 2

	Cost per Unit
Deluxe	$                  776
Regular	$                  568

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Setups	Number of setup	$ 1,800,000	500	$       3,600.00	Per setup
Machining	Number of machine hour	$ 80,000,000	400000	$          200.00	Per machine hour
Engineering	Number of Engineering hour	$ 10,500,000	150000	$             70.00	Per Engineering hour
Packing	Number of Packing order	$ 400,000	500000	$               0.80	Per Packing order

.

Cost assigned to Deluxe
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Setups	$     3,600.00	300.00	$ 1,080,000
Machining	$        200.00	100,000.00	$ 20,000,000
Engineering	$           70.00	50,000.00	$ 3,500,000
Packing	$             0.80	100,000.00	$ 80,000
Total Overheads assigned			$     24,660,000.00
Production			100,000.00
Overhead cost per unit			$ 246.60

.

Cost assigned to Regular
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Setups	$     3,600.00	200	$ 720,000
Machining	$        200.00	300000	$ 60,000,000
Engineering	$           70.00	100000	$ 7,000,000
Packing	$             0.80	400000	$ 320,000
Total Overheads assigned			$     68,040,000.00
Production			800,000.00
Overhead cost per unit			$               85.05

.

	Deluxe	Regular
Prime cost	$                  529.00	$                   483.00
Overheads	$                  246.60	$                     85.05
Total Cost per unit	$                  776	$                   568