Question

Ellix Company manufactures two models of ultra-high fidelity speakers-the X200 model and the X99 model. Data regarding the two products follow: Product Annual Production 22,eee units 43,000 units Direct Labor Hours 3.2 DLHS per unit 8.4 DLHS per unit 200 Total Direct Labor-Hours 4.402 DLHS 17,202 DLHS 21, cea DLHS X99 Additional information about the company follows: . Model X200 requires $30 in direct materials per unit, and model X99 requires $22 b. The direct labor workers are paid $20 per hour. c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. d. Model X200 is more complex to manufacture than model X99 and requires the use of special equipment. e. Because of the special work required in (d) above, the company is considering the use of activity-based absorption costing to apply manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Estimated Total Activity Total 299 150 Activity Cost Pool Machine setups Special processing General factory Activity Measure Number of setups Machine-hours Direct labor-hours Estimated Total Cost $ 185.000 367.28 648.000 $ 1.200.zee X.280 189 1,28 4.400 17.200 1,ese 21.620 Required: 1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. 0. Compute the plantwide predetermined overhead rate. b. Compute the unit product cost of each model. 2. Assume that the company decides to use activity-based absorption costing to apply overhead cost to products, . Compute the activity rate for each activity cost pool and determine the amount of overhead cost that would be applied to each model using the activity-based approach. b. Compute the unit product cost of each model. Complete this question by entering your answers in the tabs below. Rey 1A Reg 10 Red 2A Part 1 Reg 2A Part 2 Reg 28 Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. Compute the plantwide predetermined overhead rate. (Round the final answer to nearest whole number.) Predetermined overhead rates 56 per DLH Req 1B >

Answer 1

Solution 1a:

Overhead rate = $1200200/ 21600 = $56 per hour

Solution 1b:

Computation of Unit Product Cost
	X200	X99
Direct Materials	$30.00	$22.00
Direct Labor ($20*Labor hours per unit)	$4.00	$8.00
Overhead Cost per unit ($56*Labor hours per unit)	$11.20	$22.40
Unit product cost	$45.20	$52.40

Solution 2a:

Computation of Activity rates for each activity
Activities	Overhead costs	Estimated activity		Activity Rate
Machine setups	$1,85,000	250	Setups	$740.00
Special Processing	$3,67,200	1080	Machine hours	$340.00
General Factory	$6,48,000	21600	Direct labor hours	$30.00
Total	$12,00,200
Computation of Overhead Cost Applied to each model
		X200		X99
Activities	Activity Rate	Estimated Activity	Overhead Allocated	Estimated Activity	Overhead Allocated
Machine setups	$740.00	100	$74,000	150	$1,11,000
Special Processing	$340.00	1080	$3,67,200	0	$0
General Factory	$30.00	4400	$1,32,000	17200	$5,16,000
Total cost Applied			$5,73,200		$6,27,000
No. of units			22000		43000
Overhead per unit			26.05		14.58

Solution 2b:

Computation of Unit Product Cost
	X200	X99
Direct Materials	$30.00	$22.00
Direct Labor ($20*Labor hours per unit)	$4.00	$8.00
Overhead Cost per unit (Total allocation/ Units)	$26.05	$14.58
Unit product cost	$60.05	$44.58