Question

ABC Odyssey Inc. has a total of $1,890,000 in production overhead costs. The company's products and related statistics follow. Product A Product B Direct material in pounds 139,500 190,500 Direct labor hours 30,000 37,500 Machine hours 52,500 22.500 Number of setups 430 860 Number of units produced 15,000 7,500 Additional data: The 330,000 pounds of material were purchased for $435,600. One direct labor hours costs $10. a. Assume that Odyssey Inc. uses direct labor hours to apply overhead to products. Determine the total cost for each product and the cost per unit. Note: Round your final answers to two decimal places (i.e. round $4.355 to $4.36). Product A Product B Total cost $ 1,324,140 XS 1,676,460 X Total cost per unit $ 88.28 x $ 223.53 X b. Assume that Odyssey Inc. uses machine hours to apply overhead to products. Determine the total cost for each product and the cost per unit. Note: Round your final answers to two decimal places (i.e. round $4.355 to $4.36). Product A Product B Total cost $ 1,807,140 x $ 1,193,460 X Total cost per unit $ 120.48 x $ 159.13 X c. Assume that Odyssey Inc. uses the following activity centers, cost drivers, and costs to apply overhead to products: Cost Pool Cost Driver Cost Utilities # of machine hours $600,000 Setup # of setups 154,800 Material handling # of pounds of material 1,135,200 Determine the total cost for each product and the cost per unit. Note: Round your final answers to two decimal places (i.e. round $4.355 to $4.36). Product A Product B Total cost Ox $ OX Total cost per unit $ 0X $ OX Check

Answer 1

Solution: a) overhead rate=Estimated Overhead/DLH 1890000/(30000+37500) 28.00 per DLH Product A Product B Direct material Direct material in pounds x cost per pound=436500/330000 Total direct material cost-A 1,39,500.00 1.32273 1,84,520.45 1,90,500.00 1.32273 2,51,979.55 Direct labor DLH x rate per hour Total direct labor cost-B 30,000.00 10.00 3,00,000.00 37,500.00 10.00 3,75,000.00 Overhead DLH X overhead rate per DLH Total overhead cost-C 30,000.00 28.00 8,40,000.00 37,500.00 28.00 10,50,000.00 Total cost (A+B+C) Units produced Total cost per unit 13,24,520.45 16,76,979.55 15,000.00 7,500.00 88.30 223.60

b) overhead rate=Estimated Overhead/MH 1890000/(52500+22500) 25.20 per DLH Product A Product B Direct material Direct material in pounds x cost per pound=436500/330000 Total direct material cost-A 1,39,500.00 1.32273 1,90,500.00 1.32273 2,51,979.55 1,84,520.45 Direct labor DLH x rate per hour Total direct labor cost-B 30,000.00 10.00 3,00,000.00 37,500.00 10.00 3,75,000.00 Overhead MH X overhead rate per MH Total overhead cost-C 52,500.00 25.20 13,23,000.00 22,500.00 25.20 5,67,000.00 Total cost (A+B+C) Units produced Total cost per unit 18,07,520.45 11,93,979.55 15,000.00 7,500.00 120.50 159.20

activity cost pool estimated overhead cost a Utilities setup Material handling Total 600000 154800 1135200 Product A b 52,500.00 30,000.00 1,39,500.00 Activity þverhead cost assigned to Product B Total activity Activity rate Product A Product B С d=b+c e=a/d f=b*e g=c*e 22,500.00 75000 8.00000 420000 180000.00 37,500.00 67500 2.29333 68800 86000.00 1,90,500.00 330000 3.44000 479880 655320.00 968680.00 921320.00 Product A calculation of total & unit cost under ABC systsem Direct material Direct labor Overhead applied total cost / Units produced Total cost per unit 184520.45 300000.00 968680.00 1453200.45 15,000.00 Product B 251979.55 375000.00 921320.00 1548299.55 7,500.00 206.44 96.88