Question

Product Costing Accuracy, Plantwide and Departmental Rates, ABC 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: Product Related Data Scientific Business Units produced per year 72,000 720,000 Prime costs $230,000 $2,300,000 Direct labor hours 102,600 1,026,000 Machine hours 48,900 489,000 Production runs 100 150 Inspection hours 2,000 3,000 Maintenance hours 2,250 9,000 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator 75,200 27,400 Business calculator 112,860 913.140 Total 188,060 940,540 Machine hours: Scientific calculator 26,000 22,900 Business calculator 416,000 73.000 Total 442,000 95,900 Overhead costs: Setup costs $226,500 $226,500 Inspection costs 195,000 195,000 Power 249,000 162,000 Maintenance 220.000 218.750 Total $890,500 $802,250 Required:

Answer 1

Answer with working is given below

Plantwide rate $1.50 per direct labor hour Overhead cost per unit Scientific Business $2.14 per unit $2.14 per unit Plantwide rate Total Overheads Total direct labor hours $1,692,750 $1,128,600 $1.50 Per labor hour Labour hours Scientific Business Total Department 1 Department 2 75,200 27,400 112,860 913,140 188,060 940,540 Total hours 102,600 1,026,000 1,128,600 OH rate $1.50 $1.50 Total Overheads $153,886 $1,538,864 $1,692,750 Output 72,000 720,000 Cost per $2.14 $2.14 2 Departmental rates Department 1 Department 2 $2.01 per machine hour $0.85 Per direct labor hour Overhead cost per unit Scientific Business $1.05 per unit $2.25 per unit Manufacturing overhead Machine hours Machine hour rate Department 1 $890,500 442,000 $2.01 Manufacturing overhead Direct labor hours Direct labor hour rate Department 2 $802,250 940,540 $0.85 Total Overheads Output Cost per unit Department 2 Department 1 Department 2 Department 1 Department 2 | Department 1 Labour hour Total Total Machine hours Labour hours MH rate rate Overheads Overheads 26,000 27,400 $2.01 $0.85 $52,382 $23,371 416,000 913,140 $2.01 $0.85 $838,118 $778,879 $890,500 $802,250 Scientific Business Total overhead allocated $75,754 72,000 $1,616,996 720,000 $1,692,750 $1.05 $2.25 Departmental rates Department 1 Department 2 $4.74 Per direct labor hour $8.37 per machine hour Overhead cost per unit Scientific Business $7.61 per unit $1.59 per unit Manufacturing overhead Direct labor hours Direct labor hour rate Department 1 $890,500 188,060 $4.74 rate Manufacturing overhead Machine hours Machine hour rate Department 2 $802,250 95,900 $8.37 Department 1 Department 2 Labor hours Machine hours 75,200 22,900 112,860 73,000 Department 1 Department 2 Labour hour MH rate rate $4.74 $8.37 $4.74 $8.37 Department 1 Total Overheads $356,086 $534,414 $890,500 Department 2 Total Overheads $191,570 $610,680 $802,250 Cost per unit $7.61 $1.59 Total Output Overheads $547,656 72,000 $1,145,094 720,000 $1,692,750 Scientific Business Total overhead allocated 3 Overhead cost per unit Scientific Business $6.42 per unit $1.71 per unit Activity rate Calculation of Activity rates Total Total Activity Overheads Activities Set up $453,000 250 Inspection $390,000 5,000 Power $411,000 537,900 Maintenance $438,750 11,250 Total $1,692,750 $1,812.00 per production run $78.00 Per inspection hour $0.76 per machine hour $39.00 per maintenance hour Allocated Cost Allocation of Cost as per ABC method Cost Activities used Activity activity rate Scientific Business Set up $1,812.00 100 150 Inspection $78.00 2,000 3,000 Power $0.76 48,900 489,000 Maintenance $39.00 2,250 9,000 Total Overheads Allocated Total Volume Overhead cost per unit Scientific $181,200 $156,000 $37,364 $87,750 $462,314 72,000 Business $271,800 $234,000 $373,636 $351,000 $1,230,436 A 720,000 B $1.71 A/B $6.42