The Anchorage plant of the Tundra Company produces two calculators and has two p
ID: 2544570 • Letter: T
Question
The Anchorage plant of the Tundra Company produces two calculators and has two production departments: assembly and packaging, Information for the products is given below: Deluxe 20,000 Regular 200,000 $1,500,000 Total Units produced Prime costs Direct labor hours Number of setups Machine hours Inspection hours Number of moves 20,000 60 10,000 2,000 180 40 80,000 16,000 120 $1,660,000 80,000 100 90,000 18,000 300 The following table presents activity information about the departments and products: Assembly Packaging Total Direct labor hours: 10,000 150,000 10,000 10,000 20,000 160,000 Deluxe Regular Total Machine hours: Deluxe Regular 2,000 8,000 8,000 72,000 10,000 80,000 Total Overhead Costs: Setting equipment Moving material Machining Inspection Total $120,000 60,000 20,000 16,000 $120,000 60,000 180,000 $240,000 120,000 200,000 Required: a. Compute the predetermined overhead rate for each department if Assembly uses labor hours and Packaging uses machine hours. Calculate the per unit cost for each product if departmental overhead rates are used. (Round to 2 decimal places) b. Compute the predetermined plant-wide overhead rate based on direct labor hours. decimal places) Calculate the overhead rates for each overhead activity. Calculate the per unit cost of each product if activity rates are used to assign overhead. c. d. Calculate the per unit cost of each product if a plantwide overhead rate is used.(Round to 2 c. f. (Round to 2 decimal places)Explanation / Answer
a. Predetermined Overhead Rate for each Department
For Assembly basis Labor Hours = Total Overhead Cost for Assembly / Total of Labor Hours =
216,000/180,000 = $1.20
For Packaging basis Machine Hours = Total Overhead cost for Packaging/ Total Machine Hours =
504,000/90,000 =$5.60.
b. Per unit cost of Deluxe
Prime Cost = $ 160,000
Assembly Overhead(20000*1.2) =$24,000.
Packaging Overhead ( 10,000*5.6) =$56,000
Hence total Cost =$240,000.
Per Unit Cost = 240,000/20,000= $12.
Per Unit Cost of Regular
Prime Cost = $1,500,000
Assembly Overhead Cost (160,000*1.2) = $192,000
Packaging Overhead Cost ( 80,000*5.6) = $448,000.
Hence total Cost = 2,220,000$
Per Unit Cost = 2,220,000/200,000 = 11.10$.
c. Plant Wide Overhead Rate basis Direct Labor Hours
Total Plant Overhead = 720,000
Total Hours = 180,000
Plant Wide Overhead Rate = 720,000/180,000 = 4.
d. Per Unit Cost basis Plant Wide Overhead Rate
Deluxe = Prime Cost + (Direct Labor Hours * Plan Wide overhead Rate)
160,000+(20000*4) = 240,000.
Per Unit = 240,000/20,000 = 12.
Regular= Prime Cost + (Direct Labor Hours * Plan Wide overhead Rate)
1,500,000 + (160,000*4) = 2,140,000
Per Units= 2,140,000/200,000 = $10.7
e. Overhead Rate for Each Activity
Setting Equipment Activity = Basis Number of Setups.
Overhead Rate = Total Setting Equipment Cost/Number of Set ups = 240,000/100 = 2,400.
Moving Materials = Basis Number of Moves
Overhead rate = Total Moving Materials cost/Number of Moves = 120,000/300 = 400.
Machining = Basis Number of Machine Hours
Overhead rate = Total Machining Cost/Number of Machine Hours = 200,000/90000 = 2.22.
Inspection = Basis number of Inspection hours
Overhead rate = Total Inspection Cost/Number of Inspection hours = 160,000/18,000 = 8.89
f. Per Unit Costing Basis activity rates
Deluxe
Prime cost = 160,000
Setting Up (60*2400) = 144,000
Moving Material ( 180*400) = 72,000
Machining Cost (10,000*2.22) = 22,222
Inspection Cost (2000*8.89) = 17,778
Total = 416,000
Per Unit = 416,000/20.000 = $20.80
Regular
Prime cost = 1,500,000
Setting up (40*2400) = 96,000
Moving Material (120*400) = 48,000
Machining Cost (80,000*2.22) = 177,778
Inspection (16,000*8.89) = 142,222
Total = 1,964,000
Per Unit = 1,964,000/200,000 = 9.82.
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