Question

Exercise17-5 Perdon Corporation manufactures safes-large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitabilty of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead. Walk-in Safes Mobile Safes Units planned for producton Material moves per product line Purchase orders per product line 40 190 290 190 340 440 Direct labor hours per product Ine 790 1,690 The total estimated manufacturing overhead was $260,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.) (1) One mobile safe $ per unit (2) One walk-in safe $ per unit

Answer 1

fox total overhead А В C D E F G н I 1 $ 260,000.00 total overhead 3 mobile safe walk-in safe 4 total 1,690 direct labor hours 790 2,480 6 mobile safe walk-in safe 7 S 82,822.58 $177,177.42 allocated overheads units planned for production 190 40 overhead costs per unit $ 435.91 $ 4,429.44 10 11 under traditional costing 12 $ 435.91 $4,429.44 (1) one mobile safe per unit 13 (2) one walk-in safe per unit 14 15 activity allocated overheads 16 total overheads cost driver rate mobile safe walk-in safe $ 96,666.67 walk-in safe total mobile safe 17 material handling costs $160,000 $100,000 $333.33 $63,333.33 290 190 480 18 $ 128.21 $ 56,410.26 $ 43,589.74 purchasing activity costs 440 340 780 19 $ 153,076.92 $ 106,923.08 total allocated overheads 20 units planned for production 190 40 21 $ 2,673.08 overhead costs per unit $ 805.67 22 23 under activity-based costing 24 $ 805.67 $2,673.08 (1) one mobile safe per unit 25 (2) one walk-in safe per unit 26 27 total overheads allocated 28 traditional costing activity-based costing 29 $ 82,822.58 $177,177.42 $153,076.92 mobile safe 30 $106,923.08 walk-in safe 31 22

for formulas and calculations, refer to the image below -

fox total overhead B2 A В C D E F G Н 1 total overhead 260000 2 mobile safe walk-in safe 4 total direct labor hours - 790 -C5+D5 - 1690 6 mobile safe walk-in safe 7 C2/E5 C5 units planned for production 190 -C2/E5 D5 40 allocated overheads 8 9 = ROUND(C8 / C9,2) =ROUND (D8/D9,2) overhead costs per unit 10 11 under traditional costing 12 EC10 (1) one mobile safe per unit 13 ED10 (2) one walk-in safe per unit 14 15 activity allocated overheads 16 total overheads cost driver rate walk-in safe walk-in safe mobile safe total mobile safe 17 -E18 G18 -E19 G19 =SUM( 1 18 : 1 19 ) material handling costs -D18+E18 | -C18/F18 160000 290 190 -D18. G18 18 -D19+E19C19/F19 D19 G19 -SUM(H18: H19) purchasing activity costs 100000 340 19 440 total allocated overheads 20 units planned for production 190 21 40 ROUND(H20/H21,2)-ROUND(120/121,2) overhead costs per unit 22 23 under activity-based costing 24 per unit (1) one mobile safe EH22 25 (2) one walk-in safe E122 per unit 26 27 total overheads allocated 28 traditional costing activity-based costing 29 EH20 mobile safe EC8 30 ED8 walk-in safe E120 31

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