Question

Walnut Systems produces two different products, Product A, which sells for $140 per unit, and Product B, which sells for $198 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Design Engineering Hours) Machining Machine Hours) Inspection (Batches) Cost $164,406 $583,800 $ 25,650 Usage by Usage by Product Product B 200 309 1,130 3,040 38 16 Walnut manufactures 10,800 units of Product A and 6,600 units of Product B per month. Each unit of Product A uses $48 of direct materials and $20 of direct labor, while each unit of Product Buses $65 of direct materials and $26 of direct labor. Required: a. Calculate the activity rate for design, Rate for Design per hour b. Calculate the activity rate for machining, Rate for Machining per hour < Prey 6 of 14 Next > MacBook Pro

rate for design

rate for machining

rate for inspection

indirect cost for product a

indirect cost for product b

manufacturing cost for A

manufacturing for b

gross profit for a

gross profit for b

Answer 1

Answer :

(a) Activity rate for design = Total cost of Design / Total Engineering hour

= $ 164406 / 208 + 309

= $ 318 per hour

(b) Activity rate for machining = Total cost of machining / Total machine hour

= $ 583800 / 1130+ 3040

= $ 140 per hour

(c) Activity Rate for Inspection = Total cost / Number of Batch

= $ 25650 / 38 +16

= $ 475 per Batch

(d) Indirect Cost for product - A

Indirect cost
Design 208*$ 318	$ 66144
Machining 1130* $ 140	$ 158200
Inspection 38* $ 475	$ 18050
Total Indirect cost	$ 242394
Number of Unit	10800
Indirect cost per unit	$ 22.44

(e)

Indirect Cost for product - B

Indirect cost
Design 309*$ 318	$ 98262
Machining 3040* $ 140	$ 425600
Inspection 16* $ 475	$ 7600
Total Indirect cost	$ 531462
Number of Unit	6600
Indirect cost per unit	$ 80.52

(f) Manufacturing cost for product - A

	10800 unit
Direct Material 10800* $ 48	$ 518400
Direct Labor 10800* $ 20	$ 216000
Indirect cost	$ 242394
Total manufacturing cost	$ 976794
Number of unit sold	10800
Manufacturing cost per unit	$ 90.44

(g)

Manufacturing cost for product - B

	6600 unit
Direct Material 6600* $ 65	$ 429000
Direct Labor 6600*$ 26	$ 171600
Indirect cost	$ 531462
Total manufacturing cost	$ 1132062
Number of unit sold	6600
Manufacturing cost per unit	$ 171.52

(h) and (I) Gross profit for A and Gross profit for B

	A	B
Number of unit	10800	6600
Selling price	$ 140	$ 198
Sales	$ 1512000	$ 1306800
Less - Manufacturing cost	$ 976794	$ 1132062
Gross profit	$ 535206	$ 174738
Gross profit per unit	$ 49.56	$ 26.48