Question

Pacifica Industrial Products Corporation makes two products, Product Hand Product L Product H is expected to sell 47,000 units next year and Product Lis expected to sell 9,400 units. A unit of either product requires 0.9 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $4,314,600. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product 2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $2,157,300 assigned to Product Hand $2,157,300 assigned to Product L if this suggestion is followed, how much overhead cost per unit would be assigned to each product? Complete this question by entering your answers in the tabs below. Reg 1A Reg 13 Reg 2 < Prev 4 of 6 !! Next >

Answer 1

Solution:

Total Overhead Cost 4314600 Total Direct Labor Hours =(47000+9400) *0.9 hours 50760 Hours Predetermined Overhead Rate -4314600/50760 $ 85.00 per hour 1a. Product Overhead Cost per unit (85*0.9) $ Product L 76.50 $ 76.50 1b. Total Overhead Cost Product H Product L Total 1 = 76.5*47000 = 76.5*9400 35955001 719100 4314600 2 Total Overhead Cost Units Overhead Cost per unit Product Product L 2157300 2157300 47000 9400 $ 45.90 $ 229.50

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