12-17. Target Products uses the ABC method to assign overhead costs to its produ
ID: 2597035 • Letter: 1
Question
12-17. Target Products uses the ABC method to assign overhead costs to its products. The following information has been provided for March: Units Machine hours Direct labor hours Direct materials Direct labor Manufacturing overhead Product 1 Product 2 Total 3,000 2,000 5,000 2,000 4,000 6,000 2,000 2,000 4.000 $60,000 $60,000 $120,000 45,000 45,000 90,000 Utilities (machine related) Supplies (labor related) Training (labor related) Supervision (labor related) Machine depreciation (machine related) Lease on factory (machine related) Miscellaneous (labor related) Total manufacturing overhead $3,000 8,000 20,000 17,000 24,000 33,000 5.000 $110,000 Compute the manufacturing overhead allocated to each of the cost pools: machine-related and labor-related Answer: 12. Machine-related 13. Labor-related Compute the predetermined overhead rate for each of the two pools, using machine hours and direct labor hours as the bases. Answer: 14. Machine-related rate 15. Labor-related rate Compute the total costs of production for each of the two products Answer: 16. Product 1 17. Product 2Explanation / Answer
Manufacturing overhead allocated to cost pools machine related and labor related:
12. Machine related = $60,000
13. Labor related = $50,000
Predetermined rate for the two cost pools:
14. Machine related rate = 60000 / 6000 = $10
15. Labour related rate = 50000 / 4000 = $12.5
Total cost of production for two products
16. Product 1 = $1,50,000
17. Product 2 = $1,70,000
Machine related Labor related Utiliites $3,000 Supplies $8,000 Training $20,000 Supervision $17,000 Machine dep $24,000 Lease on factory $33,000 Misc $5,000 Total $60,000 $50,000Related Questions
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