Kimmel, Accounting, Ge Help I CALCULATOR PRINTER VERSION 4BACK Problem 17-2A (Pa
ID: 2523046 • Letter: K
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Kimmel, Accounting, Ge Help I CALCULATOR PRINTER VERSION 4BACK Problem 17-2A (Part Level Submission) Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,630, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit unde traditional costing for each model in 2017 was as follows. Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($43 per DLH) Total per unit cost Royale Majestic $400 100 215 $715 $650 120 258 $1,028 In 2017, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $43 per direct labor hour was determined by dividing total expected manufacturing overhead of $8,598,060 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $602 ($1,630 -$1,028) and Majestic his difference, management is considering phasing out the Royale model and increasing the production of the Majestic model. Before finalizing its decision, management asks Schultz's controller to prepare an analysis using activity- based costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2017 Activity Estimated Expected Use of Activity-Based Overhead Cost Pools Purchasing Machine setups Machining Quality control Cost Drivers Cost Drivers Overhead Rate Number of orders Number of setups Machine hours Number of inspections $1,368,500 1,011,960 5,400,000 817,600 39,100 18,740 120,000 $35/order $54/setup $45/hour 29,200 $28/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 16,700 5,440 22,400 39,100 18,740 Machine setups 13,300 n WileyPLUS-MOCS 5.Explanation / Answer
Requirement 1 Royale Majestic Activity Expected costs Expected Activity Activity rate Activity driver incurred Overhead assigned Activity driver incurred Overhead assigned Purchasing 1368500 Purchase orders 35 16700 584500 22400 784000 Machine setups 1011960 No. of setups 54 5440 293760 13300 718200 Machining 5400000 Machine hours 45 74700 3361500 45300 2038500 Quality control 817600 No. of inspection 28 10800 302400 18400 515200 Requirement Total Overhead costs 4542160 4055900 Total units produced 25000 10000 Requirement Overhead cost per unit 181.69 405.59
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