Question

Page < 12 > of 130 6. Company manufactures two products, Product C and Product D. The company estimated it would incur $167,140 in manufacturing overhead costs during the current period. Overhead currently is applied to the products based on direct labor-hours. Data concerning the current period's operations appear below: Product C Product D Estimated Volume DL hours per unit DM cost per unit DL Cost per unit 2,000 units 2.00 hours $21.50 $24.00 2,700 units 0.80 hours $24.10 $9.60 a. Compute the predetermined overhead rate under the current method and determine the unit product cost of each product for the current year. Managerial Accounting Chapter 4 Page 12 Activity-Based Costing and Analysis b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor- hours. The activity based costing system would use three activity cost pools. Data relating to these activities for the current period are given below: estructure.com/courses/24907/files/4051752?module_item_id=1415056 3 4 5 6 7 8 9 0

Answer 1

Part a
		Product C	Product D	Total
	Estimated Volume	2000	2700
	DL hours per unit	2	0.8
	Total Direct labor hours	4000	2160	6160	hours
	Predetermined Overhead rate($167,140/6160 hours)	$                    27.13	per dlh
	Total Direct labor hours	4000	2160
	Predetermined Overhead rate	$                    27.13	$                                  27.13
	Total Overhead allocated	$               1,08,532	$                                58,608
	Estimated Volume	2000	2700
	Overhead cost per unit	$                    54.27	$                                  21.71
		Product C	Product D
	DM cost per unit	$                    21.50	$                                  24.10
	DL cost per unit	$                    24.00	$                                    9.60
	Overhead cost per unit	$                    54.27	$                                  21.71
	Unit Product Cost	$                    99.77	$                                  55.41
Part b		Product C	Product D	Total
	Machine Setups	600	500	1100	setups
	Purchase Orders	750	1000	1750	orders
	General Factory	4000	2160	6160	gen factory
	Computation of ABC rate
	Activity	OH Costs(Col 1)	No. of activity base(Col 2)	Activity Rate(Col 1 / Col 2)
	Machine Setups	$                  18,271	1,100	$                             16.61	per setup
	Purchase Orders	$                  85,750	1,750	$                             49.00	per purchase orders
	General Factory	$                  67,760	6,160	$                             11.00	per gen factory
		Product C	Product D
	Machine Setups	$               9,966.00	$                             8,305.00
	Purchase Orders	$             36,750.00	$                           49,000.00
	General Factory	$             44,000.00	$                           23,760.00
	Total Overhead Cost	$             90,716.00	$                           81,065.00
	No. of units produced	2000	2700
	Overhead Cost per unit	$                    45.36	$                                  30.02