Question

precision manufacturing inc. (pmi) maked two types of industrial component parts-the EX300 and the TX500.

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts the EX300 and the TX500. It annually produces 63,000 units of EX300 and 12,800 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below. Direct materials Direct labor EX300 $369,325 $123,000 TX500 $165,550 $ 44,000 Total $534,875 $167.000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Manufacturing Overhead $ 227,650 180,600 91,080 68,470 EX300 93,000 TX500 64,000 330 Total 157,000 420 $123,000 $ 44,000 $ 167,000 Total manufacturing overhead cost $ 567,800 Required: 1-a. Compute the plantwide overhead rate that would be used in the company's conventional cost system (Round your answer to 2 decimal places.) Predetermined overhead s 3.40 per DLS rate 1-b. Using the plantwide rate, compute the unit product cost for each product. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) EX300 TX500 Unit product cost

Answer 1

1.a Plantwide Overhead Rate Estimated Manufacturing Overhead Estimated Direct Labor Cost Predetermined rate $ $ Divide 567,800 167,000 3.40 Per DLS 3.+ 1.b Calculations of unit cost under traditional method. $ $ $ Direct Material Direct Labor Overhead cost Total Cost Units Cost per unit EX300 369,325 $ 123,000 $ 418,200 $ 910,525 $ 63000 14.45 $ TX500 165,550 44,000 149,600 359,150 12800 28.06 (a) (b) (a) (b) $ Overhead Cost working 123000 x 3.40 44000 x 3.40 2.a calculate Activity Rate Expected use of cost driver Activity cost pool Estimated Overhead Activity based overhead rate Machining Setup Product Level General Factory 227,650 180,600 91,080 68,470 567,800 157000 $ 420 $ 2 $ 167000 $ 1.45 430 45,540 0.41 2.b Activity cost pool Machining Setup Product Level General Factory EX300 Activity based Expected Cost driver overhead rate 93000 $ 1.45 90 $ 430.00 1 $ 45,540.00 123000 $ 0.41 Expected Cost Cost Assigned driver $ 134,850 $ 64,000 $ 38,700 $ 330 $ 45,540 $ 1 $ 50,430$ 44,000 $ $ $ $ TX500 Activity based overhead rate Cost Assigned 1.45 $ 92,800 430.00 $ 141,900 45,540.00 $ 45,540 0.41 $ 18,040 Total Overhead Assigned 269,520 298,280 Direct Material Direct Labor Overhead cost Total Cost Units Cost per unit EX300 369,325 $ 123,000 $ 269,520 $ 761,845 $ 63000 12.09 $ TX500 165,550 44,000 298,280 507,830 12800 39.67 (a) (b) (a)/(b) $