hi i need help with this problem, appreciate it :) ACTIVITY BASED COSTING PROBLE

Question

hi i need help with this problem, appreciate it :)

ACTIVITY BASED COSTING PROBLEM Elliot Page, Inc. manufactures and sells two products, backpacks and purses. Annual sales in units of each, the labor time per unit and the total manufacturing time per year are described below: Backpacks: 2,000 units 5 hours Purses: 10,000 units * 4 hours HoURS 10,000 40,000 50,000 Total hours BACKPACKS $25 30 PURSES $17 24 Direct materials Direct labor Total overhead: $800,000 BREAKDOWN OF OVERHEAD CosTs: Estimated Costs Total Activity Backpacks Purses Labor related (labor hours) Machine setups (# of setups) Product testing (# of tests) Production orders (# of orders) Material receipts (# of receipts) General factory (machine hours) $80,000 150,000 160,000 70,000 90,000 250,000 50,000 5,000 8,000 400 750 40,000 10,000 3,000 5,000 100 150 12,000 40,000 2,000 3,000 300 600 28,000

Explanation / Answer

1) Manufacturing Overhead rate = Total Overhead/Total Hour

Manufacturing Overhead rate = 800000/50000

Manufacturing Overhead rate = 16 per hour

2)

Amount of overhead allocated to :

Back pack = 16*10000 = $ 160000

purses = 16*40000 = $ 640000

3)

4)

5)

6)

Backpack Purses Direct Material                                     25.00                                               17.00 Direct Labor                                     30.00                                               24.00 Overhead Cost per unit                                     80.00                                               64.00 Total Cost per unit                                   135.00                                             105.00

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