Puget World, Inc., manufactures two models of television sets, theN 800 XL model and the N 500 model. Data regarding the two productsfollow:
Direct Labor-
Hours per Unit Annual Production Total Direct
Labor-Hours Model N 800 XL 1.8 4,800 units 8,640 Model N 500 0.9 28,000 units 25,200
33,840
Additional information about the company follows:
a. Model N 800 XL requires $71 in direct materials per unit, and ModelN 500 requires $52.
b. The direct labor wage rate is $11 per hour. c. The company has always used direct labor-hours as the base forapplying manufacturing overhead cost to products.
d. Model N 800 XL is more complex to manufacture than Model N 500 andrequires the use of special equipment. Consequently, the company isconsidering the use of activity-based costing to assignmanufacturing overhead cost to products. Three activity cost poolshave been identified as follows:
Activity Cost Pool Activity
Measure Estimated
Overhead Cost Machine setups Number of setups $ 356,000 Special processing Machine-hours 176,000 General factory Direct labor-hours 1,268,000
$ 1,800,000
Expected Activity
Activity Measure Model N 800 XL Model N 500 Total Number of setups 50 100 150 Machine-hours 12,000 0 12,000 Direct labor-hours 8,640 25,200 33,840
2-16-2011
1. Assume that the company continues to use direct labor-hours as thebase for applying overhead cost to products.(Do not roundintermediate calculations.Round your answers to2 decimal places.)
a. Compute the predetermined overhead rate.
Predetermined overhead rate $ per DLH
b. Compute the unit product cost of each model.
Model N 800 XL $ Model N 500 $
2. Assume that the company decides to use activity-based costing toassign manufacturing overhead cost to products.
a(1) Compute the activity rate for each activity cost pool. (Round your answers to2 decimal places.)
Machine setup $ per setup Special processing $ per MH General factory $ per DLH
a(2) Determine the amount of overhead cost that would be assigned toeach model using the activity-based costing system. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)
Model N 800 XL Model N 500 Overhead cost per unit $ $
b. Compute the unit product cost of each model. (Do not round intermediatecalculations. Round your answers to 2 decimalplaces.)
Model N 800 XL Model N 500 Unit product cost $ $
Puget World, Inc., manufactures two models of television sets, theN 800 XL model and the N 500 model. Data regarding the two productsfollow: |
| Direct Labor- Hours per Unit | Annual Production | Total Direct Labor-Hours | |
| Model N 800 XL | 1.8 | 4,800 units | 8,640 |
| Model N 500 | 0.9 | 28,000 units | 25,200 |
| 33,840 | |||
| | |||
| Additional information about the company follows: |
| a. | Model N 800 XL requires $71 in direct materials per unit, and ModelN 500 requires $52. |
| b. | The direct labor wage rate is $11 per hour. |
| c. | The company has always used direct labor-hours as the base forapplying manufacturing overhead cost to products. |
| d. | Model N 800 XL is more complex to manufacture than Model N 500 andrequires the use of special equipment. Consequently, the company isconsidering the use of activity-based costing to assignmanufacturing overhead cost to products. Three activity cost poolshave been identified as follows: |
| Activity Cost Pool | Activity Measure | Estimated Overhead Cost | |
| Machine setups | Number of setups | $ | 356,000 |
| Special processing | Machine-hours | 176,000 | |
| General factory | Direct labor-hours | 1,268,000 | |
| $ | 1,800,000 | ||
| | | ||
Expected Activity | |||
| Activity Measure | Model N 800 XL | Model N 500 | Total |
| Number of setups | 50 | 100 | 150 |
| Machine-hours | 12,000 | 0 | 12,000 |
| Direct labor-hours | 8,640 | 25,200 | 33,840 |
| 1. | Assume that the company continues to use direct labor-hours as thebase for applying overhead cost to products.(Do not roundintermediate calculations.Round your answers to2 decimal places.) |
| a. | Compute the predetermined overhead rate. |
| Predetermined overhead rate | $ per DLH | |
| b. | Compute the unit product cost of each model. |
| Model N 800 XL | $ |
| Model N 500 | $ |
| 2. | Assume that the company decides to use activity-based costing toassign manufacturing overhead cost to products. |
| a(1) | Compute the activity rate for each activity cost pool. (Round your answers to2 decimal places.) |
| Machine setup | $ | per setup |
| Special processing | $ | per MH |
| General factory | $ | per DLH |
| a(2) | Determine the amount of overhead cost that would be assigned toeach model using the activity-based costing system. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.) |
| Model N 800 XL | Model N 500 | |
| Overhead cost per unit | $ | $ |
| b. | Compute the unit product cost of each model. (Do not round intermediatecalculations. Round your answers to 2 decimalplaces.) |
| Model N 800 XL | Model N 500 | |
| Unit product cost | $ | $ |
| | ||
