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 anewers to 2 decimal placa8) Product A Product B 12000 units 18 DLH per unit 3240 per unit 1,700 umits 24 DLH per unit 2.90 per unit Number of units produced Direct labor cost$30 per DLH Direct materials cost Activity Machine setup Material's handling Quality control inspections erhead costs - 5700 236,256 Using direot labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line OH Cost per erhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced Product Product A Product 8 t the market price for Product A is $30.6 and the market price for Product B is $60, determine the profit ce loss per unit for each Market price consider the following additional information about these two product lines. ts, what is the cost per unit for Product A and for Product B? ABC is used for assigning overhead costs to Produtt A Number of setupsequired or preduetion 28 etups Number of partsrequired 50 225 Machine setup Materials handling Quality contrci Total Overhead Cost erhead Assigned Activity Driver Activity Rate Produet A Machine setup Materials handing Quality control Product B Machine setup Materiais handing Quality control Product B Dinect Materials per unt Direct Labor per unit Ovarhead per unt Total manufacturing coss per unit Determine the profit or loss per unit for each product assuming ABC costing Product B Market price 4.2 Should this information influence company strategy?l No Yes

Answer 1

Total Direct Labor Hours	= DLH for Product A + DLH for Product B
	=(12,000 X 0.18) + (1,700 X 0.24)
	2,568 hours
Total Overheads	$ 236,256
Overhead per hour	92.00

Overhead Assigned	Activity Driver	Plantwide OH Rate	Total Overhead Cost	Units Produced	OH Cost per unit
Product A	DLH	92.00	$                      1,98,720	12,000	$                   16.56
Product B	DLH	92.00	$                         37,536	1,700	$                   22.08
			$                      2,36,256

	Product A	Product B
Material Cost	$                 2.40	$                           2.90
Labor Cost	$                 5.40	$                           7.20
Overhead Cost	$               16.56	$                         22.08
Total	$               24.36	$                         32.18
	Product A	Product B
Market Price	$               30.60	$                         60.00
Cost per unit	$               24.36	$                         32.18
Profit per unit	$                 6.24	$                         27.82

Machine Setup
$                94,006.00	34.00	$ 2,764.88
Materials Handling
$                57,000.00	14.00	$ 4,071.43
Quality Control
$                85,250.00	275.00	$     310.00

Overhead Assigned	Activity Driver		Activity Rate	Total Overhead Cost
Product A
Machine Setup	Number of setups	6	$                      2,764.88	$                   16,589.29
Materials Handling	Number of parts	10	$                      4,071.43	$                   40,714.29
Quality Control	Inspection Hours	50	$                         310.00	$                   15,500.00
				$                   72,803.58
Product b
Machine Setup	Number of setups	28	$                      2,764.88	$                   77,416.71
Materials Handling	Number of parts	4	$                      4,071.43	$                   16,285.71
Quality Control	Inspection Hours	225	$                         310.00	$                   69,750.00
				$                1,63,452.42
				$                2,36,256.00

	Product A	Product B
Material Cost	$        2.40	$       2.90
Labor Cost	$        5.40	$       7.20
Overhead Cost	$        6.07	$     96.15
Total	$     13.87	$   106.25
	Product A	Product B
Market Price	$     30.60	$     60.00
Cost per unit	$     13.87	$   106.25
Profit per unit	$     16.73	$   (46.25)

Yes this information must influence company's strategy since Product B is Loss making product.