Question

The following data are for the two products produced by Tadros Company. Product A Direct materials $14 per unit Direct labor hours 0.4 DLH per unit Machine hours 0.3 MH per unit Batches 100 batches Volume 10,000 units Engineering modifications 11 modifications Number of customers 500 customers Market price $36 per unit Product B $26 per unit 1.5 DLH per unit 1.1 MH per unit 200 batches 2,000 units 55 modifications 400 customers $ 95 per unit per unit The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Costs Driver Indirect manufacturing Engineering Engineering support $24,000 modifications Electricity 20,800 Machine hours Setup costs 41,000 Batches Nonmanufacturing Customer service 72,000 Number of customers Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.) 1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Product A 14.00 Direct material cost per unit $

Answer 1

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Tadros Company
Total Manufacturing overhead	Amount $	Note
Engineering Support	24,000.00
Electricity cost	20,800.00
Setup costs	41,000.00
Total Manufacturing overhead	85,800.00	A

Answer 1
Calculation of Predetermined OH Rate	Product A	Product B	Total
Volume	10,000.00	2,000.00		B
Direct Labor Hour Per unit	0.40	1.50		C
Total Direct Labor Hours	4,000.00	3,000.00	7,000.00	D=B*C
Total Manufacturing overhead			85,800.00	See A
Predetermined OH Rate			12.26	F=A/D
Allocated OH per unit	4.90			G=F*C

Direct Labor per hour	20.00	H
Direct Labor cost per unit	8.00	I=H*C

Total manufacturing cost	Product A
Direct Materials	14.00
Direct Labor	8.00	See I
Allocated OH per unit	4.90	See G
Total manufacturing cost	26.90	J

Answer 1.2	Product A
Marker price	36.00	K
Manufacturing cost per unit	26.90	See J
Gross profit per unit	9.10	L=K-J

Answer 2.1
Units purchased per customer	Product A
Volume	10,000.00	See B
Number of customer	500.00	M
Units purchased per customer	20.00	N=B/M

Gross profit generated by each customer
Gross profit per unit	9.10	See L
Units purchased per customer	20.00	See N
Gross profit per customer	182.00	O=L*N

Answer 2.2
Customer service cost per customer	Product A	Product B	Total
Number of customer	500.00	400.00	900.00	P
Customer costs			71,000.00	Q
Customer service cost per customer			78.89	R=Q/P

	Product A
Gross profit per customer	182.00	See O
Customer service cost per customer	78.89	See R
Profit (loss) per customer	103.11	S=O-R
Profit is positive so profit is adequate.

Answer 3.1
Calculation of machine hours	Product A	Product B	Total
Volume	10,000.00	2,000.00		See B
Machine Hour Per unit	0.30	1.10		T
Total machine hours	3,000.00	2,200.00	5,200.00	U=B*T

Calculation of ABC rates for overhead		V	W	X	Y=W+X	Z=V/Y
			Activity usage
Activity cost pool	Activity Measure	Cost	Product A	Product B	Total	ABC rates
Engineering Support	Engineering modifications	24,000.00	11.00	55.00	66.00	363.64
Electricity cost	Machine Hours	20,800.00	3,000.00	2,200.00	5,200.00	4.00
Setup costs	Batches	41,000.00	100.00	200.00	300.00	136.67
Total Cost assigned		85,800.00

Allocation table
Product A		See Z	See W	AA=Z*W
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Engineering Support	Engineering modifications	363.64	11.00	4,000.04
Electricity cost	Machine Hours	4.00	3,000.00	12,000.00
Setup costs	Batches	136.67	100.00	13,667.00
Total Cost assigned				29,667.04	AB
Units produced				10,000.00	See B
Costs per unit				2.97	AC=AB/B

Total manufacturing cost	Product A
Direct Materials	14.00
Direct Labor	8.00	See I
Allocated OH per unit	2.97	See AC
Total manufacturing cost	24.97	AD

Answer 3.2	Product A
Marker price	36.00	K
Manufacturing cost per unit	24.97	See AD
Gross profit per unit	11.03	AE=K-D

Answer 4.1
Gross profit generated by each customer
Gross profit per unit	11.03	See AE
Units purchased per customer	20.00	See N
Gross profit per customer	221.00	AF=AE*N

Answer 4.2	Product A
Gross profit per customer	221.00	See AF
Customer service cost per customer	78.89	See R
Profit (loss) per customer	142.11	AG=AF-R
Profit is positive so profit is adequate.