Question

Problem 4-12 Contrasting ABC and Conventional Product Cost [LO4-2, LO4-3, LO4-4) points Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 69,000 units of EX300 and 13,400 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: eBook Direct materials Direct labor EX300 $375,325 $129,000 TX500 $171,550 $ 47,000 Total $546,875 $176,000 Print The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: References Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Total manufacturing overhead cost Manufacturing Overhead $182,600 249,900 187,020 EX300 99,000 120 1 $129,000 TX500 67,000 390 Total 166,000 510 $47,000 $176,000 $704,000 Required: 1-a. Compute the plantwide overhead rate that would be used in the company's conventional cost system. 1-b. Using the plantwide rate, compute the unit product cost for each product. 2-a. Compute the activity rate for each activity cost pool. 2-b. Using the activity rates, compute the unit product cost for each product. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Compute the plantwide overhead rate that would be used in the company's conventional cost system. (Round your answer to 2 decimal places.) Predetermined overhead rate per DL$ < Req 1A Req 1B >

Answer 1

1-a: Computation of Plantwide Overhead Rate: Total Estimated Manufacturing Overhead Cost = $704,000.00 Total Direct Labor Cost = $352,000.00 Plantwide Overhead Rate = $704,000/$352,000 = $2.00 Per $ of Direct Labor Cost 1-b: Computation of Unit Product Cost using Plant wide rate: EX 300 $375,325.00 $129,000.00 TX 500 $171,550.00 $47,000.00 Direct Materials Direct Labor Cost Manufacturing Overhead ($129000x$2; $47000x$2) Total Manufacturing Cost $258,000.00 $762,325.00 $94,000.00 $312,550.00 Number of Units Produced 69000 13400 Unit Product Cost ($ 762325/69000; $312550/13400) $11.05 $23.32