Question

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			V-2
Units produced		10,000			1,000
Direct materials cost per unit	$	2		$	4
Machine hours per unit		1			2
Production runs per month		80			40

Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow.

Machine depreciation	$	93,000
Setup labor		40,800
Material handling		18,960
Total	$	152,760

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.)

Answer 1

B C D E Η A 1 a. 2 Unit cost: 3 4 Direct Material 5 Overhead (include labor) V-1 V-2 21 4 12.73 25.46 |(12.73*1) (12.73*2) 14.73 29.46 7 Unit cost V-1 V-2 Total 10000 1000 10000 2000 12000 9 Working 10 11 Units produced 12 Machine hour per unit 13 Total Machine Hours 14 15 Total Overheads 16 Overheads per unit 17 18 b. 19 Unit cost: 20 21 Direct Material 22 Overhead (include labor) 152760 12.73 per MH 152760/12,000 V-1 V-2 12.05 32.26 23 14.051 36.26 24 Unit cost 25 26 Working : 27 28 Activity 29 Machine Depreciation 30 Set up labor 31 Material Handling 32 33 2000 Activity Base Total Machine Hours No of Production Runs Direct Material Cost 10000 80 20000 409 340121 200 a+bC d/c=e fre*a g=e*b Total Activity Cost Rate per activity V-1 V-2 12000 93000 7.75 77500 15500 120 40800 272001 13600 4000 24000 18960 0.79) 15800 3160 120500 32260 No of Units 10000 1000 Overhead cost per unit 12.05 32.26 34