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 13,000 units 0.18 DLH per unit $ 1.60 per unit Product B 1,100 units 0.28 DLH per unit $ 2.30 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $ 92,012 60,000 96,900 $248,912

Answer 1

Products A	Products B
	Number of units produced	12000	1500	Units
	Direct Labor Cost @ 29 per DLH	0.17	0.28	DLH per unit
	Direct Material Cost	1.7	3	Per Unit
	Activity	Overhead Cost
	Machine Setup	67680
	Material Handling	54000
	Quality Control	107100
		228780
1)	Using Direct Labor Hours as basis for assigning Overhead Cost
	Product	Units	DLH per unit	Total Direct Labor Hours
	A	12000	0.17	2040
	B	1500	0.28	420
		13500		2460
	Overhead Cost=$228780
	Overhead cost per Direct Labor Hours=($228780/2460)=			93	DLH
	Overhead Assigned	Activity Driver	Predetermined Overhead Rate	Total Overhead Cost	Units Produced	Overhead Cost Per Unit
	Product A	DLH	93	189720	12000	15.81
	Product B	DLH	93	39060	1500	26.04
	Total Manufacturing Cost of Product A
	Direct Material Cost=12000*1.7	20400
	Direct Labor Cost=2040*29	59160
	Overhead Cost=2040*$93	189720
	Total Manufacturing Cost	269280
	Manufacturing Cost per unit=$269280/12000	22.44
	Total Manufacturing Cost of Product B
	Direct Material Cost=1500*3	4500
	Direct Labor Cost=420*29	12180
	Overhead Cost=420*$93	39060
	Total Manufacturing Cost	55740
	Manufacturing Cost per unit=$55740/1500	37.16
2)	If market price of product A is $28.68 and Product B is $56 Profit or loss
	Product A
	Price Per Unit	28.68
	Cost per Unit	22.44
	Profit or Loss	6.24
	Product B
	Price Per Unit	56
	Cost per Unit	37.16
	Profit or Loss	18.84
3)	Products A		Product B	Total
	Number of Setup required for Production	3	24	27
	Number of Parts required	18	9	27
	Inspection Hours required	60	255	315
	Machine Setup=67680/27 setup	$            2,506.67	Per Setup
	Material Handling=54000/27 Parts	$            2,000.00	Per Unit
	Quality Control=$107100/315	$                340.00	Inspection Hours
	Product A
	Direct Material Cost	$          20,400.00
	Direct Labor Cost	$          59,160.00
	Overhead
	Setup=(3*2506.67)	$            7,520.00
	Parts=(18*2000)	$          36,000.00
	Quality Control=(60*340)	$          20,400.00
	Total Cost	$       143,480.00
	Cost Per Unit=$143480/12000	$                  11.96
	Product B
	Direct Material Cost	$            4,500.00
	Direct Labor Cost	$          12,180.00
	Overhead
	Setup=24*2506.67	$          60,160.00
	Parts=9*2000	$          18,000.00
	Quality Control=(255*340)	$          86,700.00
	Total Cost	$       181,540.00
	Cost Per Unit=$181540/1500	$                121.03
	Product A
	Selling Price	$                  28.68
	Cost Per Unit	$                  11.96
	Profit or loss	$                  16.72
	Product B
	Selling Price	$                  56.00
	Cost Per Unit	$                121.03
	Profit or loss	$                (65.03)
	Product A should be contine,while price of the product B should be increased.
4 (2)	Yes