Question

Activity-Based Costing Steampunk Corporation has the following predicted indirect costs and cost drivers for 2019 for the given activity cost pools: Finishing Department Department Fabrication Cost Driver $ 30,000 15,000 Machine hours Maintenance Materials handling 22,500 Material moves 45,000 Machine 7,500 Machine setups 105,000 Inspections 37,500 Inspection hours $180,000 $82,500 Total The following activity predictions were also made for the year: Finishing Fabrication Department Department Machine hours 5,000 2,500 Material moves 1,500 750 Machine setups 350 25 Inspection hours 500 It is assumed that the cost per unit of activity for a given activity does not vary between departments. Steampunk's president, Abner Punk, is trying to evaluate the company's product mix strategy regarding two of its product models, SW100 and SG150. The company has been using a company wide overhead rate based on machine hours but is considering switching to either department rates of activity-based rate. The production manager has provided the following data for the production of a batch of 100 units for each of these models: SW100 SG150 $ 10,000 $ 15,000 Direct materials cost $ 4,000 Direct labor cost $ 3,000 Machine hours (Fabrication) 250 350 Machine hours (Finishing) 100 50 Materials moves 20 40 Machine setups 10 Inspection hours 15 30 a. Determine the cost of one unit each of SW100 and SG150, assuming a company-wide overhead rate is used based on total machine hours. Round rate to two decimal places.

Answer 1

solution anou Given that a) per overhead sate based on machine hours 35 machine hours (see note I beloce) calculation of the cost per unit e s SW 1002 $26250 per unit (see note 2 below) » - SG = '$ 320 per compt (see note z below) Notes D. Carlculation of company-wide oves head gade Total overhead = 262500 && 2 Total machine hoceps > 7500 Machine hocess overheads per machine hou os >$262500/7500 machine houss=$35 Per machine houd 2) calculation of cost per unit using company wide oved head rate. salbard roten Pasticaldos sw 100 SG150 Direct Materials $ 10,000 $15,000 Dioect laboo cost $ 4,000 $ 3,000

$ 12950 14000 overheads 35x350 $35X400 Hours Hocess Total cost of a Batch Number of conits Total cost per anit $ 26250 100 $32000 100 262.5 $320 b) overhead oote boged on machine hocess for Faboication Dept = $36 per machine hour (see note) below oves head boged on machine howegs foo finishing Dept of 33 pero machine hovol see pole below) 0 total ovesheads of faboi cation prepts $180,000 Total machine hours for fabrication Dept = 5000 hours oveshead cost pero con el houro = 36 per machine hour Total oved heads of for Finishing pept-$82500 Total machine hours for finishing Dept = 2500 ha an overhead cost per house $33 per machine houd

calculation of cost peocenit particolars Sw loo Sa 100 Dioect materials $ 10.000 $ 151000 Direct labob $ yooo 3000 manufacturing overhead $ 9000 Fabrication Deparstment 51 12600 ( 36 pedhouero X 250 C36 peshomoy Hours Finishing Department $ 3300 $1650 (33 pet houdy loo hovo) (33 peshows hours) Total cost pel Batch $ 26300 $32250 number of conits per batch 100 100 cost per anit 263 322.5 HOUDS C) calculation of activity based overhead gates Activity Maintenance material hadling machine sekeep Inspection Tot Rate $6 pers machine hoces houd $ 30 per material bele move $ 300 pes machine sefeep $ 75 per inspection hour

calculation of activity based ove shead sate Activity (A) cast pooll B) cost doiver (C) cost cost poiues (D) Bk maintenance Machine hours $45.000 $6 fer machine 7500 hours hocer hour material 67500 Maledial Movies Handling (u5000 +R2500) (2250 Matesia's moves $30 peo material maching $u2500 machine setups sefulp 105000+7500 (375€ material seques $300 pes machine set cups Inspection $37500 Inspection houds $75 peoinspection hous Total $262500 calculation of cost per unit particolars Sw loo SO 150 Dioect Mateoals $ 0.000 $15.000 Direct labout $4,000 $3,000 Maintenance $ 2100 $ 2000, CG pesmachine houshouy Xesp) (topes machine how shelly X uoo hours maleojall Handling $600 $ 1200 ($30 per malegral move x 90 Moves movex uo moves machines $1500 setups N D ($300 per machine setupy (300 per machine 5 setups) sefeep x lo sefcefs) inspection $1125 $2250 (175 peo inspection hourx ($75 per inspection hous x 30 hours) C$30027 material $3000 15 houros

Total cost $19325 $26850 Number of. 100 100 units cost per unit 1 $ 193.25 $ 26805