Question

11 "The Tonowing data are for me two products Produceuty acros Compariy 0.35 points Direct materials Direct labor hours Machine hours Batches Volume Engineering modifications Numer of customers Product A $13 per unit 0.5 DLH per unit 0.4 MH per unit 110 batches 10,000 units 10 modifications 500 custos $35 per unit Product B $28 per unit 1.5 DLH per unit 1.1 MII per unit 220 batches 2,000 unite 50 modifications 400 customers 95 per unit per ulit Market price eBook The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Ask Driver Indirect manufacturing Engineering support Electricity Setup costs Nonmanufacturing Customer service $25,500 Engineering modifications 24,800 Machine hours 12,000 Batches Print 70,000 Number of customers References 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. Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Overhead Assigned Product A Product B Product A Product B 1.2 What is the gross profit per unit? Product A Product B Market price Gross profit per unit 2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate? Product A A Product B Gross profit per unit Units purchased per customer Gross profit per customer 2.2 What is the cost of providing customer service to each customer? Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate? Product A Product B Gross profil per customer Customer service cost per customer Profit (loss) por customer Is the profit adequato? ?

Answer 1

Tadros Company
Total Manufacturing overhead	Amount $	Note
Engineering Support	25,500.00
Electricity cost	24,800.00
Setup costs	42,000.00
Total Manufacturing overhead	92,300.00	A

Answer 1
Calculation of Predetermined OH Rate	Product A	Product B	Total
Volume	10,000.00	2,000.00		B
Direct Labor Hour Per unit	0.50	1.50		C
Total Direct Labor Hours	5,000.00	3,000.00	8,000.00	D=B*C
Total Manufacturing overhead			92,300.00	See A
Predetermined OH Rate			11.54	F=A/D
Allocated OH per unit	5.77			G=F*C

Direct Labor per hour	20.00	H
Direct Labor cost per unit	10.00	I=H*C

Total manufacturing cost	Product A
Direct Materials	13.00
Direct Labor	10.00	See I
Allocated OH per unit	5.77	See G
Total manufacturing cost	28.77	J

Answer 1.2	Product A
Marker price	35.00	K
Manufacturing cost per unit	28.77	See J
Gross profit per unit	6.23	L=K-J

Answer 2.1
Units purchased per customer	Product A
Volume	10,000.00	See B
Number of customer	500.00	M
Units purchased per customer	20.00	N=B/M

Gross profit generated by each customer
Gross profit per unit	6.23	See L
Units purchased per customer	20.00	See N
Gross profit per customer	124.60	O=L*N

Answer 2.2
Customer service cost per customer	Product A	Product B	Total
Number of customer	500.00	400.00	900.00	P
Customer costs			70,000.00	Q
Customer service cost per customer			77.78	R=Q/P

	Product A
Gross profit per customer	124.60	See O
Customer service cost per customer	77.78	See R
Profit (loss) per customer	46.82	S=O-R
Profit is positive so profit is adequate.

Answer 3.1
Calculation of machine hours	Product A	Product B	Total
Volume	10,000.00	2,000.00		See B
Machine Hour Per unit	0.40	1.10		T
Total machine hours	4,000.00	2,200.00	6,200.00	U=B*T

Calculation of ABC rates for overhead		V	W	X	Y=W+X	Z=V/Y
			Activity usage
Activity cost pool	Activity Measure	Cost	Product A	Product B	Total	ABC rates
Engineering Support	Engineering modifications	25,500.00	10.00	50.00	60.00	425
Electricity cost	Machine Hours	24,800.00	4,000.00	2,200.00	6,200.00	4.00
Setup costs	Batches	42,000.00	110.00	220.00	330.00	127.27
Total Cost assigned		92,300.00

Allocation table
Product A		See Z	See W	AA=Z*W
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Engineering Support	Engineering modifications	425	10.00	4,250.00
Electricity cost	Machine Hours	4.00	4,000.00	16,000.00
Setup costs	Batches	127.27	110.00	14000.00
Total Cost assigned				34,250	AB
Units produced				10,000.00	See B
Costs per unit				3.43	AC=AB/B

Total manufacturing cost	Product A
Direct Materials	13.00
Direct Labor	10.00	See I
Allocated OH per unit	3.43	See AC
Total manufacturing cost	26.43	AD

Answer 3.2	Product A
Marker price	35.00	K
Manufacturing cost per unit	26.43	See AD
Gross profit per unit	8.57	AE=K-D

Answer 4.1
Gross profit generated by each customer
Gross profit per unit	8.57	See AE
Units purchased per customer	20.00	See N
Gross profit per customer	171.40	AF=AE*N

Answer 4.2	Product A
Gross profit per customer	171.40	See AF
Customer service cost per customer	77.78	See R
Profit (loss) per customer	93.6	AG=AF-R
Profit is positive so profit is adequate.