Smythe Crystal makes fine tableware in its Ireland factory. The following data a

Question

Smythe Crystal makes fine tableware in its Ireland factory. The following data are taken from its production plans for the year. Direct labor costs.... 5,870,000 Setup costs.....630,000 Expected production 211,000 units 17,000 units Direct labor hours required 254,000 DLH 16,400 DLH Machine setups required 200 setups 800 setups Required Determine the setup cost per unit for the wineglasses and for the commemorative vases it setup cons are assigned using a single plantwide overhead rate based on direct labor hours. Determine setup costs per unit for the wineglasses and for the commemorative vases if the setup costs are assigned based on the number of setups. Which method is better for assigning costs to each product? Explain.

Explanation / Answer

1)Overhead Rate based on Direct labor hours: $630,000 / 270,400Direct labor hours(254,000 + 16,400= 270,400

=$2.33

Wine Glasses:254,000 *$2.33=$591,820

=$591,820 / 211,000 units=$2.80 per unit

Commemmorative Vases:16,400 *$2.33=$38,212 /17,000

=$2.25 per unit

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2)Overhead Rate based on set ups: $630,000 / 1000 set up(800+200)

=$630

Wine Glasses::::200 *$630=$126,000

=$126,000 / 211,000 units=$0.60 per unit

Commemmorative Vases:800 *$630=$504,000

=$504,000 / 17,000 units

=$29.65

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3) wine glass is better in Machine cost per unit $0.60

Commemmorative Vases is better in Direct labor Hours per unit $2.25

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