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) Number of units produced Direct labor cost (@ $24 per DLH) Direct materials cost Product A 11,500 units 0.20 DLH per unit $ 2.40 per unit Product B 1,500 units 0.27 DLH per unit $ 2.70 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $137, 705 55,000 69,680 $262,385 Required 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Product B Product A Product B

Answer 1

1	Overhead Cost	262385	97.00	Per Direct Labor Hour
	Direct Labor Hr	2705
Workings
Direct Labor Hr
	NO of Units	Hr Per Unit	No of units * Hr per Units
Product A	11500	0.2	2300
Product B	1500	0.27	405
Total Direct Labor			2705
Overhead Assigned	Activity driver	Plant wide overhead rate	Total Overhead Cost	Units Produced	OH cost per Unit
Product A	2300	97.00	223100	11500	19.4
Product B	405	97.00	39285	1500	26.2
	Product A	Product B
Direct Material	2.4	2.7
Direct Labor	0.2	0.27
Overhead cost	19.4	26.2
Total Manufacturing Cost	22.00	29.17
2
	Product A	Product B
Market price	32	63
Manufacturing Cost pper unit	-22.00	-29.17
Profit Per unit	10.00	33.83
3
Machine Setup
Overhead cost	137705	5508.2	Per Setups
Number of setups	25
Material Handling
Overhead cost	55000	0.23	Per Part
Number of parts	239000			0.22
				2618
Quality Control
Overhead cost	69680	260	Per Hour
Inspection hour required	268
Product A
Overhead Assigned
Machine Setup	5	Setups	5508.2	27541
Material Handling	230000	Parts	0.23	52900
Quality Control	58	Inspection Hour	260	15080
Total Overhead cost Assigned				95521
	Total Units Produced			11500
			OH cost per Unit	8.31
Product A				8.306173913
Overhead Assigned
Machine Setup	22	Setups	5508.2	1,21,180.40
Material Handling	9000	Parts	0.23	2,070.00
Quality Control	210	Inspection Hour	260	54,600.00
Total Overhead cost Assigned				1,77,850.40
	Total Units Produced			1,500.00
			OH cost per Unit	118.57
	Product A	Product B
Direct Material	2.4	2.7
Direct Labour	0.2	0.27
Overhead cost	8.31	118.57
Total Manufacturing Cost	10.91	121.54
2
	Product A	Product B
Market price	32	63
Manufacturing Cost pper unit	-10.91	-121.54
Profit Per unit	21.09	-58.54
Yes the information influence company decision because of change in product profitability