Question

The following data are for the two products produced by Tadros Company. Direct materials Direct labor hours Machine hours Batches Volume Engineering modifications Number of customers Market price Product A $14 per unit 0.5 DLH per unit 0.4 MH per unit 120 batches 10,000 units 9 modifications 500 customers $36 per unit Product D $25 per unit 1.5 DLH per unit 1.1 MH per unit 240 batches 2,000 units 45 modifications 400 customers $95 per unit per unit The company's direct labor rate is $20 per direct labor hour (DLH). Additional Information follows. Costs Driver Indirect manufacturing Engineering support Electricity up costs Nonmanufacturing Customer service $23,000 Engineering modifications 24,800 Machine hours 43,000 Batches 74,000 Number of customers Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be Indicated with minus sign.) 1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Prey 1 of 4 Next > с G Search or type URL # % 2 3 4 5 6 7 8 9 0

Answer 1

1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.
Overhead costs	94500	11.8125	per DLH
Direct labor hours	(0.5*10,000+1.5*2000) = 8000
Overhead Assigned	Activity Driver	Plantwide OH rate	Total Overhead Cost	Units Produced	OH Cost per unit
Product A	5,000	11.8125	59,063	10,000	5.90625
Product B	3,000	11.8125	35,438	2,000	17.71875
	Product A	Product B
Direct Material	14	24
Direct Labor	10	30
Overhead	5.90625	17.71875
Cost per Unit	29.90625	71.71875
1.2 What is the gross profit per unit?
	Product A	Product B
Market price	36	95
Cost per Unit	29.90625	71.71875
Gross profit per unit	6.09375	23.28125
2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?
	Product A	Product B
Gross profit per unit	6.09375	23.28125
Units purchased per customer = Total units/Total customers	20	5
Gross profit per customer	121.875	116.40625
2.2 What is the cost of providing customer service to each customer?
		82.2222222
Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate?
	Product A	Product B
Gross profit per customer	121.875	116.40625
Customer service cost per customer	82.2222222	82.2222222
Profit (loss) per customer	39.6527778	34.1840278
Is the profit adequate?	Yes	Yes
3.1 Determine the manufacturing cost per unit of each product line using ABC.
Engineering Support	23,500	60	391.666667
Electricity	31,000	6,200	5
Setup	40,000	360	111.111111
Overhead Assigned	Activity Driver	Activity rate	Total Overhead Cost
Product A
Engineering support	10		391.666667		3,917
Electricity	4,000		5		20,000
Setup	120		111.111111		13,333
	$37,250
Product B
Engineering support	50		391.666667		19583.3333
Electricity	2200		5		11000
Setup	240		111.111111		26666.6667
	$57,250
Total manufacturing costs	Product A	Product B
Direct Materials per unit	14	24
Direct Labor per unit	10	30
Overhead per unit	$3.73	$28.63
Total manufacturing cost per unit	27.725	82.625
3.2 What is the gross profit per unit?
	Product A	Product B
Market price	36	95
Cost per Unit	27.725	82.625
Gross Profit	8.275	12.375
4.1 How much gross profit is generated by each customer of Product A and Product B using ABC?
	Product A	Product B
Gross profit per unit	8.275	12.375
Units purchased per customer	20	5
Gross profit (loss) per customer	165.5	61.875
	Product A	Product B
Gross profit per customer	165.5	61.875
Customer service cost per customer	82.22	82.22
Profit (loss) per customer	83.28	-20.345
Is the profit adequate?	Yes	No