3. Using activity-based costing, do the following: a. Determine the total amount

Question

3. Using activity-based costing, do the following: a. Determine the total amount of overhead that would be assigned to each model for the year. b. Compute the unit product cost for one unit of each model. (Do not round intermediate calculations and round your answers to 2 decimal places.) b. Compute the unit product cost for one unit of each model. (Do not round intermediate calculations and round your answers to 2 decimal places.) T-Mobile LTE * 48% @D 7:30 PM ezto.mheducation.com Marine, Inc, manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadly decined, and management has become concened about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $848,000 in overhead costs would be inourred and the company would produce and sell 2,000 units of the flexible model and 8,000 units of the rigid model. The flexible model requires 2.4 houns) of direct labor time per unit, and the rigid model requires 1.20 hours). Direct materials and labor costs per unit are given below Required: a Compute the predetermined overhead rate using direct labor- hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model . An intem suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows Compute the activity rate for each of the activity cost pools.

Explanation / Answer

Req 1-a Total labour hours required: Flexible (2000 units @2.4) 4800 Rigid (8000 units @ 1.20) 9600 Total labour hours required: 14400 Pre-determined OH rate: Estimated OH / Estimated DLH = 648000 /14400 DLH = 45 per hour Req 1-b Unit cost: Flexible rigid Material 120 65 Labour 40 15 OH per unt Flexible (2.4 hrs@45) 108 Rigid (1.20 hrs @45) 54 UNIT COST 268 134 Req 2: Activity Measures Total Cost Activity Activity Rate Purchase orders Orders 22000 275 80 per order Rework rework 12000 150 80 per rework Product testing test 220000 2200 100 per test machine related MH 394000 4925 80 per MH

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.