Question

Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 42,000 units n year and Product L expected to sell 8,400 units. A unit of either product requires 0.8 direct labor-hours The company's total manufacturing overhead for the year is expected to be $3,427,200. Required 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this meth is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product. 2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-le cost. The total manufacturing overhead would be divided in half between the two products, with $1,713,600 assigned to Product H $1,713,600 assigned to Product L. If this suggestion is followed, how much overhead cost per unit would be assigned to each product? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? (Round your answers to 2 decimal places.) Product H Product L Overhead cost per unit Rea 1B Thi. . Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product. 2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,713,600 assigned to Product H and $1,713,600 assigned to Product L If this suggestion is followed, how much overhead cost per unit would be assigned to each product? Complete this question by entering your answers in the tabs below. Req 2 Req 1A Req 1B Compute the total amount of overhead cost that would be applied to each product Product H Product L Total Total overhead cost Req 1A Rea 2 Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product. 2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,713,600 assigned to Product H and $1,713,600 assigned to Product L If this suggestion is followed, how much overhead cost per unit would be assigned to each product? Complete this question by entering your answers in the tabs below. Req 1B Req 2 Req 1A Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,713,600 assigned to Product H and $1,713,600 assigned to Product L If this suggestion is followed, how much overhead cost per unit would be assigned to each product? (Round your answers to 2 decimal places.) Show less A Product H Product L Overhead cost per unit Req 1B Req 2

Answer 1

Answers:
			H	L
1.a)	OH cost per unit		$                68.00	$            68.00
1.b)	Total OH cost		$ 2,856,000.00	$ 571,200.00
2	OH cost per unit		$                40.80	$          204.00

Workings	Under Absorption Costing
Particulars		H	L	Total
Units to be sold		42000	8400		(i)
D.L hours p.u		0.8	0.8
Total D.L hours		33600	6720	40320	(a)
Total Manu. OH				$ 3,427,200.00	(b)
Recovery Rate per D.L hour				$                85.00	(b/a)
Total applied OH		$ 2,856,000.00	$ 571,200.00		(ii)
OH cost per unit		$                68.00	$            68.00		(ii/i)

Workings	Under Activity Based Costing
Particulars		H	L
Units to be sold		42000	8400	(a)
Manu. OH apportioned		$ 1713600	$ 1713600	(b)
OH cost per unit		$ 40.80	$ 204.00	(b/a)