Precision Manufacturing Inc. (PMI) makes two types of industrial component parts
ID: 2422278 • Letter: P
Question
Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 63,000 units of EX300 and 12,800 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below
167,000
Predetermined overhead rate: _____ per DL$
Using the plantwide rate, compute the unit product cost for each product.
EX300 TX500
Unit Product Cost _______ ______
Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 63,000 units of EX300 and 12,800 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below
EX300 TX500 Total Direct materials $ 369,325 $ 165,550 $ 534,875 Direct labor $ 123,000 $ 44,000 $167,000
The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below:Activity Cost Pool
(and Activity Measure) Manufacturing
Overhead Activity EX300 TX500 Total Machining (machine-hours) $ 227,650 93,000 64,000 157,000 Setups (setup hours) 180,600 90 330 420 Product-level (number of products) 91,080 1 1 2 General factory (direct labor dollars) 68,470 $ 123,000 $ 44,000 $ 167,000 Total manufacturing overhead cost $ 567,800 1.Compute the plantwide overhead rate that would be used in the company’s conventional cost system
Predetermined overhead rate: _____ per DL$
1-b.Using the plantwide rate, compute the unit product cost for each product.
EX300 TX500
Unit Product Cost _______ ______
Activity Cost Pools Activity Rate
Machining ________ per MH
Setups ________ per set up hour
product level ________ per product
general factor ________ per DL$ 2-b. Using the activity rates, compute the unit product cost for each product.
EX300 TX500
unit product cost _______ _______
Explanation / Answer
1)Predetermined overhead rate = $567,800/167,000
= $3.4 per DL
b)
2a)
total cost $761,845 $507,830
units 63,000 12,800
Per unit cost $12.09 $39.67
EX30 TX500 Direct Materials $369,325 $165,550 Direct labor 123,000 44,000 Overead #3.4 per DL 418,200 149,600 total cost $910,525 $359,150 units 63,000 12,800 Cost per unit $14.45 $28.06Related Questions
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