4.1000 polnts Precision Manufacturing Inc. (PMI) makes two types of industrial c
ID: 2517671 • Letter: 4
Question
4.1000 polnts Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 55,000 units of EX300 and 12,000 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 Direct materials Direct labor EX300 $361,325 $157,550 $518,875 $115,000 40,000 $155,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below Activity Activity Cost Pool and Activity Measure) Manufacturing Overhead EX300 85,000 50 TX500 60,000 250 Total $ 224,750 Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) 145,000 300 105,000 40,700 48,050 $115.000 $40,000 $ 155,000 Total manufacturing overhead cost $418.500 Required:Explanation / Answer
Answers
Total Overheads to be allocated
$418,500
Total direct labor dollars [allocation base]
$155,000
Plantwide Overhead rate per DL dollars
2.7
Working
EX300
TX500
A
Direct Labor
$115000
$40000
B
Plantwide Overhead rate per DL dollars
2.7
2.7
C=A x B
Overhead allocated
$310500
$108000
D
Direct material
$361325
$157550
E=A+C+D
Total Product cost
$786,825
$305,550
F
No. of units
55000
12000
G=E/F
Unit Product Cost
$ 14.31
$ 25.46
Cost [A]
Total Activity Drivers [B]
Activity rate [A/B]
Machining
$224750
145000
$1.55
per MH
Setups
$105000
300
$350
per Setup Hr
Product Level
$40700
2
$20350
Per product
general factory
$48050
155000
0.31
per DL $
Total
$418,500
EX300
TX500
Activity rate
No. of activities
Cost Allocated
No. of activities
Cost Allocated
Machining
$1.55
85000
$131750
60000
$93000
Setups
$350
50
$17500
250
$87500
Product Level
$20350
1
$20350
1
$20350
general factory
0.31
115000
$35650
40000
$12400
Total
$205,250
$213,250
Working
EX300
TX500
A
Direct Labor
$115000
$40000
B
Overhead allocated
$205250
$213250
C
Direct material
$361325
$157550
D=A+B+C
Total Product cost
$681,575
$410,800
E
No. of units
55000
$12000
F=D/E
Unit Product Cost
$ 12.39
$ 34.23
Total Overheads to be allocated
$418,500
Total direct labor dollars [allocation base]
$155,000
Plantwide Overhead rate per DL dollars
2.7
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