Question

- Thingvold, Inc., manufactures and sells two products Product W8 and Product concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below Direct Labor Expected Hours Per Total Direct Production Unit Labor-Hours Product W8 500 7.0 3,00 Product TO 800 6,0 4.800 Total direct labor-hours 8,300 The direct labor rate is $24.80 per DLH. The direct materials cost per unit for each product is given below Direct Materials Cost per Unit Product W8 $229.40 Product TO $112.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Activity Estimated Pools Measures Overhead Cost Expected Activity Product W8 Product 70 Total Labor-related DLHs $ 337,312 3,500 4,800 8,300 Machine setups Setups 49,850 400 600 1,000 Order size MHS 636,172 4,500 4,400 8,900 $ 1.023 334 Required: In all computations involving dollars in the following requirements, round off your answer to the nearest whole cent a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direci labor-hours. Compute the company's predetermined overhead rate under this costing method b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. g. What is the difference between the overhead per unit under the traditional costing method and the activity based costing system for each of the two products? h. What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products?

Answer 1

a. Predetermined overhead rate = $1023334/8300 = $123.29 per DLH

b.

	Product W8	Product T0
Direct labor hours	3500	4800
x Overhead rate	123.29	123.29
Overhead applied $	431515	591792

c.

	Product W8	Product T0
Direct materials	229.40	112.30
Direct labor	173.60	148.80
	(7 x $24.80)	(6 x $24.80)
Overhead	863.03	739.74
	($431515/500)	($591792/800)
Unit product cost $	1266.03	1000.84

d.

Activity Cost Pool	Estimated Overhead Cost	Expected Activity	Activity Rate
Labor-related	337312	8300	40.64	per DLH
Machine setups	49850	1000	49.85	per setup
Order size	636172	8900	71.48	per MH

Per HOMEWORKLIB RULES the first 4 parts have been answered. Please post the remaining separately. Thank you.