Question

€ C !!! Apps e zto.mheducation.com/han.px M Gmail YouTube Maps Harrison Company makes two products and uses a conventional conting system in which a single plantwide, predetermined overhead rate is computed based on direct labour hours. Data for the two products for the upcoming year follow: Rincon $ 29 40 $ 20.00 Parcel $ 22.60 S 440 Direct materials cost per unit Direct labour couper unit Direct labour hours per unit Number of units produced 28,000 122.000 These products are customized to some degree for specific customers Required: 1. The company's manufacturing overhead costs for the year are expected to be $870,000. Using the company's traditional costing system, compute the unit product costs for the two products (Round Intermediate calculations and round your final answers to 2 decimal places.) Rascon Parcel Unit product cost 2. Management is considering an ABC system in which half of the overhead would continue to be allocated on the basis of direct labour-hours and half would be allocated on the basis of engineering design time This time is expected to be distributed as follows during the upcoming year. Rascon 5,800 Parcel 2,900 Total 8,700 Engineering design time (in hours) (Round Compute the unit product costs for the two products using the proposed ABC system intermediate calculations and round your final answers to 2 decimal places.) Type here to search

Answer 1

Answer:

1. Calculation of unit product cost under Conventional costing system:

Total manufacturing overhead for the year expected to be $870000

Manufacturing overhead is to be allocated on the basis of direct labor hours

Total labor hours = (28000 units*.8) + (122000*.3) = 59000 hours

Manufacturing overhead to be allocated to Rascon = $870000 * 22400/59000 =$330305

Manufacturing overhead to be allocated to Parcel = $870000 * 36600/59000 = $539695

Manufacturing overhead cost per unit for Rascon = $330305/28000 =$11.79

Manufacturing overhead cost per unit for Parcel = $539695/122000 = $4.42

Calculation of unit product cost

Particulars	Rascon($)	Parcel($)
Direct material cost per unit	29.4	22.6
Direct labor cost per unit	20.0	4.4
Manufacturing Overhead cost per unit	11.79	4.42
Unit Product Cost	61.19	31.42

2. Calculation of Unit product cost under ABC system

Under proposed ABC system , half of the overhead would continue to be allocated on the basis of direct labor hours and half would be allocated on the basis of engineering design time.

Overhead cost to be allocated on the basis of direct labor hours = $870000/2 = $435000

To be allocated to Rascon = $435000 * 22400/59000 = $165153

To be allocated to Parcel = $ 435000*36600/59000 = $269847

Overhead cost to be allocated on the basis of engineering design time = $870000/2 = $435000

To be allocated to Rascon = $435000*5800/8700 = $290000

To be allocated to Parcel = $435000*2900/8700 = $145000

Unit overhead cost for Rascon = ($165153+$290000)/28000 = $16.26

Unit overhead cost for Parcel = ($269847+$145000) /122000 = $ 3.40

Calculation of unit Product cost

Particulars	Rascon($)	Parcel($)
Direct material cost per unit	29.4	22.6
Direct labor cost per unit	20.0	4.4
Manufacturing Overhead cost per unit	16.26	3.4
Unit Product Cost	65.66	30.4