5 Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1

Question

5 Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2 The following data are for the two products produced by Tadros Company points DiEeCE mater Direct labor Kachine hours $14 per unit 25 per unit 0.4 Dall per unit 1-4 DCH per unit 1.0 Mt er unit 230 batehes 2,000 unats 5 modification" 100 cuntoners hours 3 HH per 135 batches 10.000 units Engineering modafications9modracations Number ot customers Market price 35 per unit95 per unit per The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows References Engineering support $26, 500 Engsneerina modificaton Electricity Setup coat 25,000 Machine 13,000 Datches hoarS Monmanufncturing Curtoner service 70,000 Nunber ot custonerES Required: (Round your per unit cost answers to 2 decimel pleces and other answers to nearest whole number. Loss amounts should be indiceted with minus sign) Cempute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours H Cost per erhead Assigned Astivity Plantwide Off rate Total Oveshead Cost Units Produced Driver Product A

Explanation / Answer

Solution 1:

Solution 1.2 and 2.1:

Solution 2.2 and 2.3:

Solution 3.1:

Solution 3.2 and 4.1:

Solution 4.2:

Solution 5:

Activity based costing method gives better information to managers of this company.

Computation of overhead rate and Overhead assignment to product - (Plantwide overhead rate) Particulars Product A Product B Total Direct labor hours per unit 0.4 1.4 Volume (In Units) 10000 2000 Direct Labor hours 4000 2800 6800 Manufacturing overhead $94,500.00 Overehead rate - Per direct labor hour (Manufacturing overhead/Direct labor hour) $13.90 Overhead allocation $55,588 $38,912 $94,500 Overhead cost per unit $5.56 $19.46

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