Product-Costing Accuracy, Plantwide and Departmental Rates, ABC Escuha Company p
ID: 2547837 • Letter: P
Question
Product-Costing Accuracy, Plantwide and Departmental Rates, ABC Escuha Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products: Product-Related Data Scientific Business Units produced per year 75,000 750,000 Prime costs $232,000 $2,320,000 Direct labor hours 97,300 973,000 Machine hours 47,300 473,000 Production runs 100 150 Inspection hours 2,000 3,000 Maintenance hours 2,250 9,000 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator 74,200 23,100 Business calculator 126,490 846,510 Total 200,690 869,610 Machine hours: Scientific calculator 22,300 25,000 Business calculator 347,880 125,120 Total 370,180 150,120 Overhead costs: Setup costs $231,500 $231,500 Inspection costs 180,000 180,000 Power 241,000 144,000 Maintenance 208,000 230,750 Total $860,500 $786,250 Required:
1. Compute the overhead cost per unit for each product using a plantwide, unit-based rate using direct labor hours.
Round your calculations and answers to the nearest cent.
Plantwide rate $ per direct labor hour
Overhead cost per unit:
Scientific $ per unit
Business $ per unit
2. Compute the overhead cost per unit for each product using departmental rates. In calculating departmental rates, use machine hours for Department 1 and direct labor hours for Department 2. Round departmental rates and the overhead cost per unit to the nearest cent if rounding is required.
Departmental rates:
Department 1 $ per machine hour
Department 2 $ per direct labor hour
Overhead cost per unit:
Scientific $ per unit
Business $ per unit
Repeat using direct labor hours for Department 1 and machine hours for Department 2. Round departmental rates and the overhead cost per unit to the nearest cent if rounding is required. Departmental rates:
Department 1 $ per direct labor hour
Department 2 $ per machine hour
Overhead cost per unit:
Scientific $ per unit
Business $ per unit
3. Compute the overhead cost per unit for each product using activity-based costing. Round your calculations and answers to the nearest cent.
Overhead Cost
Scientific $ per unit
Business $ per unit
Explanation / Answer
Solution 1:
Total Direct labor hours = 97300+973000 = 1070300
Total overhead = $860,500 + $786,250 = $1,646,750
Pre determined overhead rate = $1,646,750 / 1070300 = $1.53858 per direct labor hour
Overhead applied to scientific calculator = 97300*$1.53858 = $149,704.54
Overhead applied to business calculator = 973000*$1.53858 = $1,497,045.46
Overhead cost per unit scientific calculator = $149,704.54/75000 = $1.996 per unit
Overhead cost per unit business calculator = $1,497,045.46 / 750000 = $1.996 per unit
Solution 2a:
Solution 2b:
Solution 3:
Computation of department wide overhead rate - ABC Escuha Company Particulars Department 1 Department 2 Overhead Cost $860,500.00 $786,250.00 Machine hours for Deptt 1 370180 Labor hours for Deptt 2 869610 Overhead rate (Deptt 1 - Per machine hour, Deptt 2 - Per labor hour) $2.32454 $0.90414Related Questions
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