Question

Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced Direct labor cost (@ $29 per DLH) Direct materials cost Product A 12,000 units 0.14 DLH per unit $ 1.80 per unit Product B 1,900 units 0.21 DLH per unit $ 2.30 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $ 46,240 55,000 85,870 $187,110 Required: 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Product B Product A Product B 2. If the market price for Product A is $24.7 and the market price for Product B is $57, determine the profit or loss per unit for each product. Product A Product B Market price 3. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B?

Answer 1

1)	Using direct labor hours as the basis for assigning overhead costs,determine the total production cost per unit for each
	product line
	Overhead costs		187,110	90	per direct labor hr
	Direct labor hours		2079
	Overhead assigned		Activity	Plantwide	Total	Units	OH cost
			driver	OH rate	oH cost	produced	per unit
	Product A		1680	90	151200	12,000	12.6
	Product B		399	90	35910	1,900	18.9
	total manufacturing cost per unit				Product A	Product B
	Direct materials cost per unit				1.8	2.3
	Direct labor cost per unit				4.06	6.09
	Overhead cost per unit				12.6	18.9
	Total manufacturing cost				18.46	27.29
2)	If the market price for product A is        and the market pricefor Product B is ,determine the profit or loss for each product
					Product A	Product B
	Market price				24.7	57
	Manufacturing cost per unit				18.46	27.29
	Profit(loss) per unit				6.24	29.71
3)	Consider the following addittional information about these two product lines .IF Abc is used for assigning overhead cost
	Machine setup
	Overhead costs		46,240	1156.00	per setup
	number of setups		40
	Material handling
	Overhead costs		55,000	0.29	per part
	number of parts		190800
	Quality control
	Overhead costs		85,870	310.00	per inspection hour
	inspection hours		277
	Overhead assigned		Activity Driver		Activity rate		total OH cost
	Product A
	Machine setup		6	per setup	1156.00	per setup	6936
	Material handling		168,000	per part	0.29	per part	48428
	Quality control		52	per inspection hour	310.00	per inspection hour	16120
	total overhead costs assigned						71484
	total units produced						12,000
	overhead cost per unit						5.96
	Product b
	Machine setup		34	per setup	1156.00	per setup	39304
	Material handling		22,800	per part	0.29	per part	6572
	Quality control		225	per inspection hour	310.00	per inspection hour	69750
	total overhead costs assigned						115626
	total units produced						1,900
	overhead cost per unit						60.86
	total manufacturing cost per unit				Product A	Product B
	Direct materials cost per unit				1.8	2.3
	Direct labor cost per unit				4.06	6.09
	Overhead cost per unit				5.96	60.86
	Total manufacturing cost				11.82	69.25
4)	If the market price for product A is        and the market pricefor Product B is ,determine the profit or loss for each product
					Product A	Product B
	Market price				24.7	57
	Manufacturing cost per unit				11.82	69.25
	Profit(loss) per unit				12.88	-12.25