Question

Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2 The following data are for the two products produced by Tadros Company Direct materials Direct labor hours Machine hours Batches Volume Engineering modifications Number of customers Market price Product $15 per unit 0.4 DLM per unit 0.3 per unit 115 batches 10,000 units 10 modifications 500 customers $35 per unit Products $28 per unit 1.6 DLH per unit 1.2 MH per unit 230 batches 2,000 units 50 modifications 400 customers $120 per unit The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. costs Indirect manufacturing Engineering support Electricity Setup costs Nonmanufacturing Customer service $23,500 Engineering modifications 21,600 Machine hours 41,000 Batches 74.000 Number of customers Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.) 1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Product B

Answer 1

Due to character limit I am attaching the image for last part Total manufacturing cost Direct Materials Direct Labor Allocated OH per unit Total manufacturing cost Product A 15.00 8.00 2.96 25.96 Product B 28.00 32.00 28.26 88.26 See See AC AD Answer 3.2 Marker price Manufacturing cost per unit Gross profit per unit Product A 35.00 25.96 9.04 Product B 120.00 88.26 31.74 | к See AD AE=K-D Answer 4.1 Gross profit generated by each custom Gross profit per unit Units purchased per customer 1 Gross profit per customer Product A 9.04 20.00 181.00 Product B 31.74 5.00 159.00 See AE See N AF=AE*N B Answer 4.2 Gross profit per customer 5 Customer service cost per customer Profit (loss) per customer 7 Profit is positive so profit is adequate. Product A 181.00 82.22 98.78 Product B 159.00 82.22 76.78 See AF See R AG=AF-R Answer 5 ABC costing is better. .

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Tadros Company
Total Manufacturing overhead	Amount $	Note
Engineering Support	23,500.00
Electricity cost	21,600.00
Setup costs	41,000.00
Total Manufacturing overhead	86,100.00	A

Answer 1
Calculation of Predetermined OH Rate	Product A	Product B	Total
Volume	10,000.00	2,000.00		B
Direct Labor Hour Per unit	0.40	1.60		C
Total Direct Labor Hours	4,000.00	3,200.00	7,200.00	D=B*C
Total Manufacturing overhead			86,100.00	See A
Predetermined OH Rate			11.96	F=A/D
Allocated OH per unit	4.78	19.14		G=F*

Direct Labor per hour	20.00	20.00	H
Direct Labor cost per unit	8.00	32.00	I=H*C
Total manufacturing cost	Product A	Product B
Direct Materials	15.00	28.00
Direct Labor	8.00	32.00	See I
Allocated OH per unit	4.78	19.14	See G
Total manufacturing cost	27.78	79.14	J
Answer 1.2	Product A	Product B
Marker price	35.00	120.00	K
Manufacturing cost per unit	27.78	79.14	See J
Gross profit per unit	7.22	40.86	L=K-J
Answer 2.1
Units purchased per customer	Product A	Product B
Volume	10,000.00	2,000.00	See B
Number of customer	500.00	400.00	M
Units purchased per customer	20.00	5.00	N=B/M
Gross profit generated by each customer	Product A	Product B
Gross profit per unit	7.22	40.86	See L
Units purchased per customer	20.00	5.00	See N
Gross profit per customer	144.00	204.00	O=L*N

Answer 2.2
Customer service cost per customer	Product A	Product B	Total
Number of customer	500.00	400.00	900.00	P
Customer costs			74,000.00	Q
Customer service cost per customer			82.22	R=Q/P

	Product A	Product B
Gross profit per customer	144.00	204.00	See O
Customer service cost per customer	82.22	82.22	See R
Profit (loss) per customer	61.78	121.78	S=O-R
Profit is positive so profit is adequate.

Answer 3.1
Calculation of machine hours	Product A	Product B	Total
Volume	10,000.00	2,000.00		See B
Machine Hour Per unit	0.30	1.20		T
Total machine hours	3,000.00	2,400.00	5,400.00	U=B*T

Calculation of ABC rates for overhead U V W Z=V/Y Activity cost pool Engineering Support Electricity cost Setup costs Total Cost assigned Activity Measure Cost Engineering modificati 26,000.00 Machine Hours 26,000.00 Batches 40,000.00 92,000.00 Product A 9.00 3,000.00 115.00 X Y=W+X Activity usage Product B Total 45.00 54.00 2,200.00 5,200.00 230.00 345.00 ABC rates 481.48 5.00 115.94 Allocation table Product A Activity cost pool Engineering Support Electricity cost Setup costs Total Cost assigned Units produced Costs per unit See Z Activity Measure ABC Rates Engineering modificati 481.48 Machine Hours 5.00 Batches 115.94 See W AA=Z*w Activity used Cost assigned 9.00 4,333.32 3,000.00 15,000.00 115.00 13,333.10 32,666.42 10,000.00 3.27 AB See B AC=AB/B Product B Activity cost pool Engineering Support Electricity cost Setup costs Total Cost assigned Units produced Costs per unit See Z Activity Measure ABC Rates Engineering modificati 481.48 Machine Hours 5.00 Batches 115.94 See W | AA=Z*w Activity used Cost assigned 45.00 21,666.60 2,200.00 11,000.00 230.00 26,666.20 59,332.80 2,000.00 29.67 AB See B AC=AB/B