Chang Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Plain and Fancy, about which it has provided the following data:
Plain | Fancy | ||||||
Direct materials per unit | $ | 24.50 | $ | 59.30 | |||
Direct labor per unit | $ | 5.00 | $ | 25.00 | |||
Direct labor-hours per unit | 0.20 | 1.00 | |||||
Annual production | 45,000 | 15,000 | |||||
The company's estimated total manufacturing overhead for the year is $985,440 and the company's estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures | Estimated Overhead Cost | |||
Supporting direct labor (DLHs) | $ | 384,000 | ||
Setting up machines (setups) | 255,840 | |||
Parts administration (part types) | 345,600 | |||
Total | $ | 985,440 | ||
Expected Activity | |||||
Plain | Fancy | Total | |||
DLHs | 9,000 | 15,000 | 24,000 | ||
Setups | 1,032 | 936 | 1,968 | ||
Part types | 624 | 240 | 864 | ||
The manufacturing overhead that would be applied to a unit of product Fancy under the activity-based costing system is closest to:
Multiple Choice
$71.57.
$41.06.
$8.11.
$30.51.
Ans. | Option 4th $30.51 | ||||||
Activity | Overhead cost | Total Expected Activity | Activiy rate | Activity of Fancy | Overhead assigned | ||
( A) | (B) | © | (D) | (C*D) | |||
Supporting direct labor | $384,000 | 24000 | $16 | per DLH | 15000 | $240,000 | |
Setting up machines | $255,840 | 1968 | $130 | per setup | 936 | $121,680 | |
Parts administration | $345,600 | 864 | $400 | per part type | 240 | $96,000 | |
Total Overhead Cost assigned to Product Fancy | $457,680 | ||||||
*Calculations of per unit overhead cost assigned to product Fancy: | |||||||
Total overhead cost assigned (a) | $457,680 | ||||||
Annual production (b) | 15000 | ||||||
Overhead cost per unit (a / b) | $30.51 | ||||||
Chang Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its produ...
Chang Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Plain and Fancy, about which it has provided the following data: Direct materials per unit Direct labor per unit Direct labor-hours per unit Annual production Plain $ 24.50 $ 5.00 0.20 45,000 Fancy $ 59.30 $ 25.00 1.00 15,000 The company's estimated total manufacturing overhead for the year...
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