Question

Gigabyte, Inc. manufactures three products for the computer Industry: Gismos (product G): annual sales, 8,000 units Thingamajigs (product T): annual sales. 15,000 units Whatchamacallits (product W): annual sales, 4,000 units The company uses a traditional, volume-based product-costing system with manufacturing overhead applied on the basis of direct- labor dollars. The product costs have been computed as follows: Hav material Direct labor Nanufacturing overhead. Total product cost Product G $ 35.00 16.00 (.8 hr. at $20) 140.00 $191.00 Product $ 52.50 12.00 (.6 hr. at $20) 105.00 $169.50 Product W $17.50 8.00 (4 hr. at $20) 70.00 $95.50 *Calculation of predetermined overhead rate: Manufacturing overhead budget! Machine setup Machinery Inspection Material handling Engineering Total $ 5,250 1,225,000 525,000 875,000 344,750 $2.975,000 Direct-labor budget (based on budgeted annual sales): Product G! Product T: Product W: Total 8,000 $16.00 15,000 $12.00 4,000 x $ 8.00 - - = $129.000 180,000 32,000 $240,000 Predetermined overhead rate - Budgeted overhead Budgeted direct labor - 875

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Answer 1

Hello,

I have used Activity Based Costing Method as asked in question. So,Overhead are allocated as per Activity Based Costing by using Cost Driver and there given percentages.

I have also assumed that number of units produced and sold are equal and 1 unit of Raw- Material is equal to 1 unit of Product Manufactured.
AnАле Gigaby te Pre- O Determination of percentage of Raw Raw- Malemal Annual Cost pertunt Volume Product Material Required: Annual Raw. Percentage of Total Raw Material Cost Material cost $ 35.00 8,000 280,000 24.62% 69.23% e + 52.50 15,000 787500 17.50 4,000 70,000 6:15% Total cost $ 11 3 7,500 100% Note : Assume & umber of units Produced and sold are equal. I much of Raw Material is equal to 1 milt of goods Produced. @ Determining Product costs using Activity Based Costing System (ABC) - Statement of Cost-Pool Activity Cost Pool Amount ($) Cost Driver [ IT W Machine Setup $5,950 No. of setups | 1050 1575 2625 Machtuery 1,225,000 Mauline Hours 306850/612,500 306,250 Irespection 525000 No.of Inspecting 78,750 236,250/ 210,000 Material Handling 875,000 Raw Material / 218,750 /603,750/52,500 3,44,750 No. of Change /120,662.50/34,475 /189,612.50 2975000 СФун Engineering Orders

32,000 Machinery - Statement of Cost Particulars Product G Product T Product W Direct Material 280,000 787,500 70,000 Dileet Labour 128,000 180,000 Machine Sebup 1050 1575 2625 306,250 612,500 306250 Suspection 78,750 236,250 210,000 Material Handling 218,750 603,750 52,500 120,662.50 34,475 189,612.50 - Total Cost 11, 133462.50 24 56,050 862,987.50 Number of units sold I 8000 15,000 4000 Cost Perumir $ 141.68 163.74 215.75 Calculation of a target Price for each product, using Gigabyte's Pricing formula Engineering Product w Product T 163.74 Particulars Cost per units (+) Maur-up (50%) Product G $141.68 70.84 215.75 81.87 107.88 Tauger new Price based on Products Costs $212.59 $245.61 $323.63