Question

Consider the following data for two products of Gitano Manufacturing (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit answers to 2 decimal places.) Sumber of units produced Direct bor boat (625 per DLR) Direct materials cast 11,500 units 0.11 U per unit 1.800 units 0.27 D per unit 6 2.30 unit 6 9.625 Activity Machine setup Materials handling Quality control inspections 14,010 6148,835 Required: Answer is complete but not entirely correct. 1. Using direct labor hours as the basis for assing overhead costs, determine the total production cost per unit for each product line 8500 per direct labor Overhead.costs Dired labor hours Overhead Assigned $143.033S 1.751 Activity Plantwide OH Total Overhead Units Produced Ow Cost per

Answer 1

1) # of units produced Product A Product B 1,800 --> (a) 0.27 --> (b) 486 --> (a) x (b) 11,500 Direct labor hour per unit 0.11 Direct labor hours used 1,265 $148,835 Estimated total mfg. overhead cost 1,751 [1265 + 486] $85.00 per direct labor hour Estimated direct labor hours Predetermined overhead rate [$148835 / 1751 DLHS] (c) / (d) ОН Cost (a) Activity (b) (c)=(a)x(b) (d) Plantwide Total OH Units Overhead Assigned: OH Rate Produced Cost Driver Per Unit $85.00 $107,525 $41,310 $9.35 Product A 1,265 11,500 $85.00 $22.95 Product B 1,800 486 Product A Product B Total Manufacturing Cost Per Unit: Direct material cost/unit $2.30 [Given] $6.75 [0.11 DLH x $25; 0.27 DLH x $25] $22.95 [As calculated above] $1.90 Direct labor cost/unit $2.75 $9.35 Mfg. Overhead cost/unit Total Manufacturing Cost $14.00 $32.00

Product A 2) Market pricer per unit Manufacturing cost per unit Profit (Loss) per unit Product B $19.12 $61.00 -$14.00 -$32.00 $5.12 $29.00 Product A 3) # of units produced # of parts required per unit Number of parts required per product Product B 1,800 --> (a) 10 --> (b) 18,000 -> (а) х (b) 11,500 16 184,000 Therefore, total number of parts required [184000 + 18000] 202,000 (a) / (b) (a) Activity Cost $9,825 $55,000 $84,010 (b) Volume Activity Rate Activity Cost Pool Machine Setup Cost Driver # of setups # of parts # of inspection hours $350.89 per setup 28 Materials Handling $0.27 per part 202,000 QC Inspections $310.00 per inspection hour 271

(u) x (v) Activity (v) (u) Activity Activity costs assigned to Product A: Activity Usage Rate Cost Machine Setup 8 setup 184,000 part 56 inspect. hrs. $350.89 $2,807.12 $49,680.00 $17,360.00 $69,847.12 Materials Handling $0.27 QC Inspections Total overhead cost assigned $310.00 Total units produced Overhead cost per unit 11,500 $6.07 [$69847.12 / 11500] (u) x (v) (v) (u) Activity Activity Activity costs assigned to Product B: Activity Usage Rate Cost Machine Setup $350.89 $7,017.80 $4,860.00 $66,650.00 $78,527.80 20 setup Materials Handling QC Inspections Total overhead cost assigned Total units produced Overhead cost per unit 18,000 part 215 inspect. hrs. $0.27 $310.00 1,800 $43.63 [$78527.8 / 1800] Total Manufacturing Cost Per Unit: Direct material cost/unit Direct labor cost/unit Product A Product B $2.30 [Given] $6.75 [0.11 DLH x $25; 0.27 DLH x $25] $43.63 [As calculated above] $52.68 $1.90 $2.75 $6.07 Mfg. Overhead cost/unit Manufacturing cost per unit $10.72

Product B 4) Market pricer per unit Product A $19.12 $61.00 -$10.72 -$52.68 Manufacturing cost per unit Profit (Loss) per unit $8.40 $8.32 4.2) Yes, Profit or Loss per unit will influence firm's strategy because the profit or loss per unit significantly varies between two methods used to calculate overhead cost per unit.