Question

Escuha Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products: Units produced per year Prime costs Direct labor hours Machine hours Production runs Inspection hours Product-Related Data Scientific Business 72,000 720,000 $253,000 $2,530,000 101,300 1,013,000 47,400 474,000 100 2,000 3,000 2,250 9,000 150 Maintenance hours Department Data Department 1 Department 2 75,200 111.430 186,630 26,100 901.570 927,670 Direct labor hours: Scientific calculator Business calculator Total Machine hours: Scientific calculator Business calculator Total Overhead costs: Setup costs Inspection costs 23,300 358,820 382,120 24,100 115,180 139,280 Power $227,500 190,000 268,000 209.000 $894,500 $227,500 190,000 155,000 218,500 $791,000 Maintenance Total

Answer 1

Escuha Company
Answer 1
Calculation of Plant wide OH Rate	Department 1	Department 2	Total	Note
Overhead costs	894,500.00	791,000.00	1,685,500.00	A
Direct Labor Hours	186,630.00	927,670.00	1,114,300.00	B
Predetermined OH Rate			1.51	C=A/B

Overhead cost per unit	Scientific	Business	Note
Direct Labor Hours	101,300.00	1,013,000.00	D
Predetermined OH Rate	1.51	1.51	See C
Allocated OH	152,963.00	1,529,630.00	E=C*D
Units produced	72,000.00	720,000.00	F
Overhead cost per unit	2.12	2.12	G=E/F
Answer 2
Calculation of Departmental OH Rate	Department 1	Department 2
Overhead costs	894,500.00	791,000.00	See A
Direct Labor/ Machine Hours	382,120.00	927,670.00	H
Predetermined OH Rate	2.34	0.85	I=A/H
Overhead cost per unit	Scientific	Business
Machine Hours	23,300.00	358,820.00	J
Predetermined OH Rate- Dept. 1	2.34	2.34	See I
Allocated OH- Dept. 1	54,522.00	839,638.80	K=J*I
Labor Hours	26,100.00	901,570.00	L
Predetermined OH Rate- Dept. 1	0.85	0.85	See I
Allocated OH- Dept. 2	22,185.00	766,334.50	M=L*I
Total Allocated OH	76,707.00	1,605,973.30	N=K+M
Units produced	72,000.00	720,000.00	See F
Overhead cost per unit	1.07	2.23	O=N/F
Calculation of Departmental OH Rate	Department 1	Department 2
Overhead costs	894,500.00	791,000.00	See A
Direct Labor/ Machine Hours	186,630.00	139,280.00	P
Predetermined OH Rate	4.79	5.68	Q=A/P
Overhead cost per unit	Scientific	Business
Labor Hours	75,200.00	111,430.00	R
Predetermined OH Rate- Dept. 1	4.79	4.79	See Q
Allocated OH- Dept. 1	360,208.00	533,749.70	S=R*Q
Machine Hours	24,100.00	115,180.00	T
Predetermined OH Rate- Dept. 1	5.68	5.68	See Q
Allocated OH- Dept. 2	136,888.00	654,222.40	U=Q*T
Total Allocated OH	497,096.00	1,187,972.10	V=S+U
Units produced	72,000.00	720,000.00	See F
Overhead cost per unit	6.90	1.65	W=V/F

Answer 3
Calculation of ABC rates for overhead		X	Y	Z=X+Y	AA	AB	AC=AB+AC	AD=Z/AC
Activity cost pool	Cost Driver	Department 1	Department 2	Cost	Scientific	Business	Quantity	ABC rates
Setups	Production runs	227,500.00	227,500.00	455,000.00	100.00	150.00	250.00	1,820.00
Inspection	Inspection hours	190,000.00	190,000.00	380,000.00	2,000.00	3,000.00	5,000.00	76.00
Power	Machine Hours	268,000.00	155,000.00	423,000.00	47,400.00	474,000.00	521,400.00	0.81
Maintenance	Maintenance hours	209,000.00	218,500.00	427,500.00	2,250.00	9,000.00	11,250.00	38.00
Total Cost assigned				1,685,500.00

		See AD	See AA	AE=AD*AE	See AB	AF=AD*AB
Allocation table			Scientific	Business
Activity cost pool	Cost Driver	ABC Rates	Activity used	Cost assigned	Activity used	Cost assigned
Setups	Production runs	1,820.00	100.00	182,000.00	150.00	273,000.00
Inspection	Inspection hours	76.00	2,000.00	152,000.00	3,000.00	228,000.00
Power	Machine Hours	0.81	47,400.00	38,454.55	474,000.00	384,545.45
Maintenance	Maintenance hours	38.00	2,250.00	85,500.00	9,000.00	342,000.00
Total Cost assigned				457,954.55		1,227,545.45	AG
Number of units				72,000.00		720,000.00	See F
Overhead cost per unit				6.36		1.70	AH=AG/F