Question

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 825 per DLH) Direct materials CONE Product 11.500 units 0.11 DLH per unit $ 1.90 per unit Product B 1.800 units 0.27 DLH per unit $ 2.30 per unit Activity Machine setup Materials handling Quality control inspections Overhead coats $ 9.825 55,000 84,010 $148,835

Answer 1

Total Labour hours required for each Product Product A (11,500 [email protected] DLH): Product B(1,800 units @.27 DLH): Total Labour Hours 1265 486 1751 Requirement 1: Plant-wide Overhead rate (based on Direct Labour Hours) = Total Overheads/Total Direct Labour Hours = ($148,835/ 1,751 labour hours) = $85 per DLH Overhead Assigned Product A Product B Activity Driver 1265 DLH 486 DLH o/ Rate $85 $85 Total Overheads 107525 41310 No. of Units 11,500 1,800 Cost per unit 9.35 22.95 Product A 1.90 Product B 2.30 Total Manufacturing Cost per unit: Direct Material per unit Direct Labour Perunit - Product A(0.11 DLH @25 per DLH) -Product B(0.27 DLH @25 per DLH) Overhead cost per unit (as computed above) 2.75 6.75 22.95 9.35 Total Manufacturing cost per unit 14.00 32.00

Requirement2: Product A Product B Market Value per unit Less: Manufacturing cost per unit Profit per unit 19.17 14.00 5.17 61.00 32.00 29.00 Requirement 3: Cost under ABC analysis Machine Setup: Machine Setup: Total Machine Setup cost/Total Machine Setups $9,825 / (8+20) Setups = $350.89 persetup Material handling: Total Material Handling Cost/Total number of parts required Material Handling: $ 55,000 /(16+10)= $2,115.39 per part required Quality Control: Total Quality Control Cost/ Number of Inspection Hours Quality Control: $ 84,010/ (56+215)= $310 per inspection hour Activity Driver Activity rate Overhead Cost Overhead Assigned Product A Machine Setup Material handling Quality Control 350.89 2115.39 310 8 setups 16 parts 56 inspection hrs Total Overheads Number of Units Overhead per unit 2807.12 33846.24 17360.00 55013.36 11,500 4.79

Product B Machine Setup Material handling Quality Control 350.89 2115.39 310 20 setups 10 parts 215 inspection hrs Total Overheads Number of Units Overhead per unit 7017.80 21153.90 66650.00 94821.70 1,800 52.68 Total Manufacturing Cost Direct Material per unit Direct Labour per unit Overhead cost per unit Product A 1.90 2.75 4.79 Product B 2.30 6.75 52.68 Total Manufacturing cost per unit 9.44 61.73 Requirement 4: Product A Market Price per unit 19.17 9.44 Product B 61.00 61.73 Less: Manufacturing cost per unit Profit/(Loss) per unit 9.73 -0.73