Question

Siegel Corporation produces a product that is available in both a Deluxe and a Regular model. It is estimated that $2,410,000 in manufacturing overhead costs will be incurred and that the company will produce 9,500 units of the Deluxe model and 20,000 units of the Regular model.

The Direct Materials and Direct Labor costs per unit are as follows:

                                                                                         Deluxe    Regular

      Direct Materials cost per unit……………………….    $155        $124

      Direct Labor cost per unit…………………………..      $20           $11

The company uses Activity-Based Costing to allocate manufacturing overhead costs to its products. Four activity cost pools and their associated activities are as follows:

                                                                    Estimated                    Estimated Activity

                                                                    Overhead                 Deluxe              Regular

Activity Cost Pool and Activity Measure           Cost

Purchase orders (number of orders)          $   100,000         300 orders         700 orders

Rework requests (number of requests)         220,000          500 requests     600 requests

Product testing (number of tests)                   480,000           6,000 tests        10,000 tests

Machine-related (machine hours)               1,610,000         16,000 hours     24,250 hours

Total Estimated Overhead                        $2,410,000

Compute the following:

• The activity rate for each Activity Cost Pool;
• The unit Manufacturing Overhead cost for each model;
• The unit product cost for each model

  

Siegel Corporation produces a product that is available in both a Deluxe and a Regular model. It is estimated that $2,410,000 in manufacturing overhead costs will be incurred and that the company will produce 9,500 units of the Deluxe model and 20,000 units of the Regular model.

The Direct Materials and Direct Labor costs per unit are as follows:

                                                                                         Deluxe    Regular

      Direct Materials cost per unit……………………….    $155        $124

      Direct Labor cost per unit…………………………..      $20           $11

The company uses Activity-Based Costing to allocate manufacturing overhead costs to its products. Four activity cost pools and their associated activities are as follows:

                                                                    Estimated                    Estimated Activity

                                                                    Overhead                 Deluxe              Regular

Activity Cost Pool and Activity Measure           Cost

Purchase orders (number of orders)          $   100,000         300 orders         700 orders

Rework requests (number of requests)         220,000          500 requests     600 requests

Product testing (number of tests)                   480,000           6,000 tests        10,000 tests

Machine-related (machine hours)               1,610,000         16,000 hours     24,250 hours

Total Estimated Overhead                        $2,410,000

Compute the following:

• The activity rate for each Activity Cost Pool;
• The unit Manufacturing Overhead cost for each model;
• The unit product cost for each model

Answer 1

ACTIVITY RATE= total cost/ cost driver

activity	cost	cost driver	Activity rate
purchase orders	100000	1000orders[300+700]	100$ per order	[100000/1000orders]
rework requests	220000	1100requests[500+600]	200$ per request	[220000/1100 requests]
product testing	480000	16000tests[6000+10000]	30$ per test	[480000/16000]
machine related	1610000	40250hours [16000+24250]	40$ per hour	[1610000/40250]

2.unit manufacturing overhead

	deluxe	regular
purchase order	30000[100$*300]	70000[$100*700]
rework requests	100000[500*$200]	120000[600*$200]
product testing	180000[30*6000]	300000[30$*10000]
machine related	640000[16000*40$]	970000[24250*40$]
total manufacturing overhead	950000	1460000
units product	9500	20000
unit manufacturing overhead	100$	73$

3.

	deluxe	regular
direct material	155	124
labor	20	11
unit manufacturing overhead	100	73
unit product cost	275	208