Question

Calculator Activity-Based Costing and Product Cost Distortion Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department The production department is estimated to require 4,000 direct labor hours. The total indirect laboris budgeted to be $686,400. Time records from Indirect labor employees revealed that they spent 60% of their time setting up production runs and 40% of their time supporting actual production The following information about cell phones and tablet PCs was determined from the corporate records: Number Direct Labor Units Setups Hours 1.600 Cellphones 58.000 2,000 2.000 88,000 Tablet PC Total 2.400 4,000 176,000 If required, round your answers to the nearest cent. .. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plant wide factory overhead rate system using the direct labor hours as the con base and the other for Cell phones Xper unit Tablet PCs Determine the budgeted activity costs and activity rates for the indirector under activity-based costing. Assume two activities one for set oduction support Previous Next mat Submit Assignment for Grading ter Save and Exit All work saved MacBook Air

Answer 1

Solution a:

Plantwide overhead rate = $686400/ 4000 = $171.60

Indirect labor cost allocated to Cell phones = ($171.60 *2000 hours) /88000 units = $3.90 per unit

Indirect labor cost allocated to Tablet PCs = ($171.60 *2000 hours) /88000 units = $3.90 per unit

Solution b:

Computation of Budgeted Activity Cost and Activity rates
	Budgeted Activity Cost	Total Cost Driver		Activity Rate (Cost / Drivers)
Setup ($686400*60%)	$4,11,840	2400	setups	$171.60
Production Support (686400*40%)	$2,74,560	4000	Direct Labor hours	$68.64

Solution c:

Computation Activity cost per unit allocated to Cell Phones
	Usage of Cost Driver	Activity Rate	Allocated Cost
Setup	1600	$171.60	$2,74,560
Production Support	2000	$68.64	$1,37,280
Total Activity cost Allocated to Cell phones			$4,11,840
Units			88000
Activity cost per unit (Cell phone)			$4.68
Computation Activity cost per unit allocated to Tablet PCs
	Usage of Cost Driver	Activity Rate	Allocated Cost
Setup	800	$171.60	$1,37,280
Production Support	2000	$68.64	$1,37,280
Total Activity cost Allocated to Tablet PCs			$2,74,560
Units			88000
Activity cost per unit (Tablet PCs)			$3.12