Question

Perdon Corporation manufactures safes-large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead. Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line Mobile Safes 210 310 450 810 Walk-in Safes 51 250 340 1,710 The total estimated manufacturing overhead was $276,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.) (1) One mobile safe s per unit (2) One walk-in safe s per unit LINK TO TEXT The total estimated manufacturing overhead of $276,000 was comprised of $163,000 for materials handling costs and $113,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of materials handling costs are assigned to: (a) One mobile safe per unit $ (b) One walk-in safe $ per unit

Answer 1

Solution 1) Total Estimated Manufacturing Overheads Total Direct labor hours (810 +1710) Manufacturing Overheads per hour (a) (b) (a/b) $ 2,76,000 2520 $ 109.52 $422.45 per unit $3,672.27 per unit Computing Cost per unit: One mobile safe - ($109.52 x 810 /210 units) One Walk-in safe - ($109.52 X 1710/51 units) Solution 2) Total Estimated material handling costs Total Material moves (310 + 250) Material Handling cost per move (a) (b) (a/b) $1,63,000 560 $ 291.07 Computing Material Cost per unit: One mobile safe - ($291.07 x 310/210 units) One Walk-in safe - ($291.07 x 250/51 units) $ 429.68 per unit $1,426.82 per unit Total Estimated Purchasing activity costs Total Purchase orders (450 +340) Purchasing activity per order (a) (b) (a/b) $1,13,000 790 $ 143.04 Computing Purchasing activity costs per unit: One mobile safe - ($143.04 x 450/210 units) One Walk-in safe - ($143.04 x 340/51 units) $ 306.51 per unit $953.59 per unit Solution 3) Activity Traditional based Costing costing $ 422.45 $ 736.19 $ 3,672.27 $2,380.41 Mobile safe Walk-in safe

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