Question

ACCT 210 Chapter 5 Supplemental in Class Assignment Numbers Text Model A Product Data Model B 100,000 110,000 10,000 Units produced per year Direct Labor hours Production Set-ups Inspection hours Machine hours Maintenance hours 50,000 40 800 20,000 10,000 350,000 60 1,200 180,000 90,000 400,000 100 2,000 200,000 100,000 Total Activity Rate Overhead costs: Set-up Costs Inspection costs Machining Costs Maintenance Costs 300,000 250,000 240,000 210,000 1,000,000 Activity Driver Pr00015 Inspection hours Machine hog Maintenance hours nu 1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. Overhead Per Direct Labor Hour Model A Model B Total Overhead Units Overhead per Unit 2. Compute the overhead cost per unit for each product using Activity Based Costing Overhead Cost: Model A Model B Total Overhead Overhead per Unit

Answer 1

Answer is given below

Overhead rate per direct labor hour Total Overheads Direct labor hours $1,000,000 400,000 $2.50 Per Direct labor hour Direct labor hours Overhead absorption rate/DL Total Overheads Total Output Overhead cost per unit Model A 50,000 $2.50 $125,000 10,000 $12.50 Model B 350,000 $2.50 $875,000 100,000 $8.75 A/B Working notes Calculation of Activity rates Activity Activity rate Set-up costs Inspection costs Machining costs Maintenance costs Total budgeted indirect costs Total Overheads $300,000 $250,000 $240,000 $210,000 $1,000,000 Total Activities 100 2,000 200,000 100,000 $3,000.00 Per set up $125.00 Per inspection hour $1.20 Per machine hour $2.10 Per Maintenance hour Allocation of Overheads - ABC method Cost activity rate Activities used Allocated Cost Activity Model A Model B 40 60 Set-up costs Inspection costs Machining costs Maintenance costs Total Overheads $3,000.00 $125.00 $1.20 $2.10 800 20,000 10,000 1,200 180,000 90,000 Model A $120,000 $100,000 $24,000 $21,000 $265,000 10,000 $26.50 Model B $180,000 $150,000 $216,000 $189,000 $735,000 A 100,000 B $7.35 A/B Total Output Overhead cost per unit Unit overheads cost using Activity Based Costing Model A Set-up costs $120,000 Inspection costs $100,000 Machining costs $24,000 Maintenance costs $21,000 Total Overhead $265,000 Total Output 10,000 Overhead cost per unit $26.50 Model B $180,000 $150,000 $216,000 $189,000 $735,000 100,000 $7.35