Question

Required information Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow. V-1 10,000 $ 2 Units produced Direct materials cost per unit Machine hours per unit Production runs per month V-2 1,000 $ 4 2 40 80 Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow. Machine depreciation Setup labor Material handling Total $51,000 24,000 15,600 $90,600 Required: a. Compute the unit costs for the two products V-1 and V-2 using the current costing system at Upriver (using machine hours as the allocation basis). (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Compute the unit costs for the two products V-1 and V-2 using the proposed ABC system at Upriver. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Unit Cost V-1 V-2 $ 9.55 $ 19.10 a. b. Using current costing system Using proposed ABC system

Answer 1

Answer:

1.

		V-1	V-2
a.	Using current costing system	$     9.55	$    19.1
b.	Using proposed ABC system	$     9.15	$    23.1

a.

Unit cost:
		V-1	V-2
Direct Material		$          2.00	$            4.00
Overhead (include labor)		$          7.55	$          15.1
		(7.55*1)	(7.55*2)
Unit cost		$          9.55	$          19.1

Working :

		V-1	V-2	Total
Units produced		10,000	1,000
Machine hour per unit		1	2
Total Machine Hours		10,000	2,000	12,000
Total Overheads				$   90600
Overheads per unit	$90600/12,000			$        7.55	per MH

b.

Unit cost:
		V-1	V-2
Direct Material		$            2.00	$            4.00
Overhead (include labor)		$            7.15	$          19.1
Unit cost		$            9.15	$          23.1

Working :

		a	b	a+b=c	d	d/c=e	f=e*a	g=e*b
Activity	Activity Base	V-1	V-2	Total	Activity Cost	Rate per activity	V-1	V-2
Machine Depreciation	Total Machine Hours	10000	2000	12000	$      51000	$              4.25	$         42500	$              8500
Set up labor	No of Production Runs	80	40	120	$      24000	$          200	$         16000	$              8000
Material Handling	Direct Material Cost	20000	4000	24000	$      15600	$              0.65	$         13000	$              2600
							$         71500	$            19100
					No of Units		10000	1000
					Overhead cost per unit		$                  7.15	$                   19.1