Ramsey Company produces speakers (Model A and Model B). Both products pass throu

Question

Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data has been gathered for the two products:

CONCEPTUAL CONNECTION Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate?

1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. (Round to two decimal places.)

Plantwide rate: __________ per DLH

2. Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead costs to two decimal places.)

Note: Be sure to complete both tables below.

. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1: (machine intensive) with a rate of $3.90 per machine hour and Department 2: (labor intensive) with a rate of $1.20 per direct labor hour. The consumption of these two drivers is as follows:

Compute the overhead cost per unit for each product by using departmental rates. (Round to two decimal places.)

Product Data Model A Model B Units produced per year 10,000 100,000 Prime costs $153,000 $1,530,000 Direct labor hours 143,000 310,000 Machine hours 21,000 196,000 Production runs 40 60 Inspection hours 900 1,300 Maintenance hours 8,000 92,000 Overhead costs: Setup costs $300,000 Inspection costs 209,000 Machining 318,200 Maintenance 260,000 Total $1,087,200

Explanation / Answer

Question .1

Question 2:

Question 3:

Estimated total overhead      10,87,200 Estimated Direct labor hours        4,53,000 OH rate per hour               2.40 Product Hours used Rate OH applied Production OH cost per unit Model A        1,43,000          2.40        3,43,200           10,000        34.32 Model B 310000          2.40        7,44,000        1,00,000          7.44 Total 453000          2.40      10,87,200

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