Question

Ellix Company manufactures two models of ultra-high fidelity speakers—the X200 model and the X99 model. Data regarding the two products follow: Product X200 X99 Direct Labor-Hours 0.5 DLHs per unit 0.7 DLHs per unit Annual Production 23,000 units 44,000 units Total Direct Labor-Hours 11,500 DLHS 30,800 DLHS 42,300 DLHS Additional information about the company follows: a. Model X200 requires $40 in direct materials per unit, and model X99 requires $29. b. The direct labor workers are paid $40 per hour. c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. d. Model X200 is more complex to manufacture than model X99 and requires the use of special equipment. e. Because of the special work required in (d) above, the company is considering the use of activity-based absorption costing to apply manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Estimated Total Activity Activity Cost Pool Machine setups Special processing General factory X99 132 Activity Measure Number of setups Machine-hours Direct labor-hours Estimated Total Cost $ 149,600 294,000 1,269,000 $ 1,712,600 X200 88 1,050 11,500 Total 220 1,050 42,300 30,800 Activate W

Answer 1

1A. Predetermined Overhead rate = $1712600 / 42300 = $40.40 per direct labor hour

1B.

	X200	X99
Direct Material Cost	$     9,20,000	$   12,76,000
Direct Labor Cost	$     4,60,000	$   12,32,000
Manufacturing Overhead	$     4,65,600	$   12,47,000
Total Product Cost	$   18,45,600	$   37,55,000
Units	23000	44000
Unit Product Cost	$          80.24	$          85.34

2a.

		Expected Activity
Activity Cost of Pool	Estimated	X200	X99	Total	Cost per activity
	Overhead Cost
Machine Setups	$     1,49,600	88	132	220	$      680
Special Processing	$     2,94,000	1050	0	1050	$      280
General Factory	$   12,69,000	11500	30800	42300	$        30
Total manufacturing overhead cost	$   17,12,600

	X200	X99
Manufacturing Overhead
Machine Setups	$        59,840	$        89,760
Special Processing	$     2,94,000	$                 -
General Factory	$     3,45,000	$     9,24,000
Total manufacturing overhead cost	$     6,98,840	$   10,13,760
Units	23000	44000
Overhead cost per unit	$30.38	$23.04

2b.

	X200	X99
Direct Material Cost	$     9,20,000	$   12,76,000
Direct Labor Cost	$     4,60,000	$   12,32,000
Manufacturing Overhead
Machine Setups	$        59,840	$        89,760
Special Processing	$     2,94,000	$                 -
General Factory	$     3,45,000	$     9,24,000
Total manufacturing overhead cost	$     6,98,840	$   10,13,760
Total Product Cost	$   20,78,840	$   35,21,760
Units	23000	44000
Unit Product Cost	$          90.38	$          80.04