Exercise 4-6 (Part Level Submission) Perdon Corporation manufactures safes—large

ID: 2421783 • Letter: E

Question

Exercise 4-6 (Part Level Submission)

Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.

(a) The total estimated manufacturing overhead was $263,600. Under traditional costing (which assigns overhead on the basis of direct-labor hours), what amount of manufacturing overhead costs are assigned to: (Round intermediate calculations and answers to 2 decimal places, e.g. $12.25.)
(1) Mobile safe $________ per unit

(2) Walk-in safe $________ per unit

(b) The total estimated manufacturing overhead of $263,600 was comprised of $163,300 for material-handling costs and $100,300 for purchasing activity costs. Under activitybased costing (ABC): (Round intermediate calculations and answers to 2 decimal places, e.g. $12.25.)

(1) What amount of material handling costs are assigned to:

(a) Mobile Safe $________ per unit.

(b) Walk-in Safe $________ per unit.

(2) What amount of purchasing activity costs are assigned to:

(a) Mobile Safe $_______ per unit.

(b) Walk-in Safe $_______ per unit.

Mobile Safes Walk-in Safes Units planned for production 210 60 Material moves per product line 310 290 Purchase orders per product line 460 360 Direct labor hours per product line 810 1710

Explanation / Answer

Predetermined overhead rate = $263,600/2520

= $104.60

1)Mobile safe = 104.60*810/210 = $403.46 per unit

Purchasing activity = 104.60*1710/60 = $2981.10

b) Materials handling 163,300/600 = $272.17

Purchasing activity = 100,300/820 = $122.32

(1)Materials -

Mobile safe = 310*272.17/210 = $401.77

Walk in safe = 290*272.17/60 = $591.21

Purchasing = Mobile safe = 460*122.32/210 = $267.94 per unit

Walk in safe = 360*122.32/60 = $733.92