Question

Cabio Company manufactures two products, Product C and Product D. The company estimated it would incur $196,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor- hours. Data concerning the current period's operations appear below: Estimated volume Direct labor-hours per unit Direct materials cost per unit Direct labor cost per unit Product C 4,750 units 3.10 hours $ 21.10 $ 31.00 Product D 3,950 units 3.20 hours $ 35.10 $ 32.00 Required: a-1. Compute the predetermined overhead rate under the current method. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH a-2. Determine the unit product cost of each product for the current year. (Round your intermediate calculations and final answers to 2 decimal places.) Product C Product D Unit product cost b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below: Expected Activity Activity Cost Pools Machine setups Purchase orders Order size Total Estimated Overhead Cost $ 14,090 80,940 101,880 $196,910 Product C 300 1,200 14,725 Product D 310 1,540 12,640 Total 610 2,740 27,365 Determine the unit product cost of each product for the current period using the activity-based costing approach. (Round your intermediate calculations and final answers to 2 decimal places.) Product C Product D Unit product cost

Answer 1

Total Estimated Manufacturing Overhead Cost	$                              196,910
Total Estimated Direct labor hrs[(4750*$3.10)+(3950*$3.20)]	27365	hours
Predetermined overhead rate	$                                    7.20	per labor hrs
	Product C	Product D
Direct Materials Cost per unit	$                                  21.10	$                                      35.10
Direct labor Cost per unit	$                                  31.00	$                                      32.00
Overhead Cost per unit(Direct labor hrs per unit*$7.20)	$                                  22.32	$                                      23.04
Unit Product Cost	$                                  74.42	$                                      90.14
Computation of Activity Rate
Activities	Costs	Activity Base	Cost driver total	Overhead rate(Costs/Cost driver total)
Machine Setups	$14,090	Number of machine setups	610	$23.10
Purchase Orders	$80,940	Number of purchase order	2,740	$29.54
Order Size	$101,880	Number of order size	27,365	$3.72
Total	$196,910
		Product C	Product D
	ABC rate	Activity Based usage	Activity Based usage*ABC rate	Activity Based usage	Activity Based usage*ABC rate
Machine Setups	$                                  23.10	300	$                                         6,930	310	$                                     7,161
Purchase Orders	$                                  29.54	1200	$                                       35,448	1540	$                                   45,492
Order Size	$                                    3.72	14725	$                                       54,777	12640	$                                   47,021
Overhead Cost			$                                       97,155		$                                   99,673
No. of units produced			4750		3950
Overhead Cost per unit			$                                         20.45		$                                     25.23
	Product C	Product D
Direct Materials Cost per unit	$                                  21.10	$                                      35.10
Direct labor Cost per unit	$                                  31.00	$                                      32.00
Overhead Cost per unit	$                                  20.45	$                                      25.23
Unit Product Cost	$                                  72.55	$                                      92.33