Question

Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2 The following data are for the two products produced by Tadros Company Direct materials Direct labor hours Machine hours Batches Volu Engineering modifications Number of customers Market price Product A $15 per unit 0.4 DLH per unit 2.3 MH per unit 115 batches 10,000 units 10 modifications 500 customers $35 per unit Product B 528 per unit 1.6 DLH per unit 1.2 per unit 230 batches 2.000 units se modifications 400 customers $120 per unit The company's direct labor rate is $20 per direct labor hour (DLH) Additional information follows. Driver Indirect manufacturing Engineering support Electricity Setup costs Hosanufacturing Customer service $23,500 21,000 41,000 Engineering nodifications Machine hours catches 74,000 Number of customers Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.) 3 Answer is not complete. Compute the manufacturing cost per uniting the plantwide overhead rate based on direct labor hour

Answer 1

1. Compute the manufacturing cost per unit using the plant wide overhead rate based on direct labor hours. Overhead costs = 23500+21600+41000 861001 11.96 per direct labor hour Direct labor hours= 10000*0.4+2000* 1.6 7200 Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Product A= 10000*0.4 4000 11.96 47,840.00 Product B= 2000*1.6 3200 11.96 38,272.00 Units Produced | OH Cost per unit 10000 4.78 2000 19.14 Direct material cost per unit Direct labor cost per unit (A=20*0.4), (B=20*1.6) Overhead cost per unit Total manufacturing cost Product A 15.00 8.00 4.78 27.78 Product B 28.00 32.00 19.14 79.14 1.2 What is the gross profit per unit? Market price Total manufacturing cost Gross profit per unit Product A 35.00 27.78 7.22 Product B 120.00 79.14 40.86 - 5 2.1 How much gross profit is generated by each customer of Product A and Product B using the plant wide overhead rate? Product Al Product B Gross profit per unit 7.22 40.86 Units purchased per customer (A=10000/500), (B=2000/400) 20 Gross profit per customer 144.40 204.30 | 2.2 What is the cost of providing customer service to each customer? customer service cost 74,000 82.22 per customer Number of customer= 500+400 9001 Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate? Product A Product B Gross profit per customer 144.40 204.30 Customer service cost per customer 82.22 82.22 Profit (loss) per customer 62.18 122.08 Is the profit adequate? Yes Yes

391.67 per modification 3.1 Determine the manufacturing cost per unit of each product line using ABC. Engineering Support overhead cost 23500 Number of modification=10+50 60 Electricity overhead cost 21,600 Number of machine hours=10000*0.3+2000* 1.2 5400 Setup overhead cost 41,000 Number of batches= 115+230 4.00 per machine hours 118.84 per batch 345 Activity Driver Activity rate Total Overhead Cost 10 Modifications 3000 Machine hours 115 Batches 391.67 4.00 118.84 per modification per machine hours per batch 3,917 12,000 13,667 29,584 10,000 2.96 Overhead Assigned Product A Engineering support Electricity=10000*0.3 Setup Total overhead cost assigned Total units produced overhead cost per unit Product B Engineering support Electricity=2000*1.2 Setup Total overhead cost assigned Total units produced overhead cost per unit Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit 50 Modifications 2400 Machine hours 230 Batches 391.67 4.00 118.84 per modification per machine hours per batch 19,584 9,600 27,333 56,517 2,000 28.26 Product A 15.00 8.00 2.96 25.96 Product B 28.00 32.00 28.26 88.261 Product B 120.00 88.26 31.74 3.2 What is the gross profit per unit? Product A Market price 35.000 Total manufacturing cost per unit 25.96 Gross profit per unit 9.04 4.1 How much gross profit is generated by each customer of Product A and Product B using ABC? Product Al Gross profit per unit 9.04 Units purchased per customer (A=10000/500), (B-2000/400) 20.00 Gross profit per customer 180.80 4.2 Is the gross profit adequate for each customer of Product A and B using ABC? 1 Product A ll Gross profit per customer 180.80 Customer service cost per customer 82.22 Profit (loss) per customer 98.58 Is the profit adequate? Yes Product B 31.74 5.00 158.70 Product B 158.70 82.22 76.48 Yes 5) Activity based costing method.