Question

Titan Pride produces two product lines: T-shirts and Sweatshirts. The company has used a simple costing system since its inception. The budgeted factory overhead totals $242,000 and is allocated on the basis of 121,000 direct labor hours (DLHs). Additional production information for the two products is as follows: T-SHIRTS SWEATSHIRTS Production volume 60,000 units 35,000 units 1.2 1.4 DHLs (per unit) Direct costs (per unit) $ 6.50 $ 8.20

Answer 1

Solution 7:

Predetermined overhead rate = Estimated overhead / Estimated direct labor hours = $242,000 / 121000 = $2 per DLH

Hence last option is correct.

Solution 8:

Unit cost of Sweatshirt = Direct cost per unit + Overhead cost per unit = $8.20 + (1.4*$2) =$11 per unit

Hence 3rd option is correct.

Solution 9:

Overhead rate - Supervision activity = Budgeted cost / Budgeted DLH = $100,920 / 87000 = $1.16 per DLH

Hence 2nd option is correct.

Solution 10:

Overhead cost allocated to Sweatshirt using ABC = (42000*$1.16) + ($141,080/70540 * 17500) = $83,720

Unit cost of sweat shirt using ABC = Direct cost per unit + Overhead cost per unit

= $8.20 + ($83,720 / 35000) = $10.59 per unit

Hence first option is correct.

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