Machuga, Inc., manufactures and sells two products: Product C1 and Product M2. D
ID: 2424742 • Letter: M
Question
Machuga, Inc., manufactures and sells two products: Product C1 and Product M2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production
Direct Labor-Hours Per Unit
Total Direct Labor-Hours
Product C1
800
9.0
7,200
Product M2
700
11.0
7,700
Total direct labor-hours
14,900
The direct labor rate is $18.70 per DLH. The direct materials cost per unit is $297.00 for Product C1 and $246.20 for Product M2.
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
The overhead applied to each unit of Product M2 under activity-based costing is closest to:
$1,118.13 per unit
$1,122.22 per unit
$647.22 per unit
$1,013.40 per unit
Expected Production
Direct Labor-Hours Per Unit
Total Direct Labor-Hours
Product C1
800
9.0
7,200
Product M2
700
11.0
7,700
Total direct labor-hours
14,900
Explanation / Answer
Answer. $1118.13 Expected Activity Activity Cost Pools Activity Product C1 Product M2 Total Labor-related DLHs 269,856 288,596 $558,452 = ($558452/14900) X 7200 = ($558452/14900) X 7700 Production orders orders 34200 41040 75,240 = ($75240/1100) X 500 = ($75240/1100) X 600 General factory MHs 433,356 453,054 886,410 = ($886410/9000) X 4400 = ($886410/9000) X 4600 737,412 782,690 1,520,102 No of Units Produced 800 700 Overhead Applied Per Unit 921.77 1,118.13
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