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6 Aug 2018
Looking to achieve the highest grade possible, please see below. Please indicate if this answer is correct. IF I have left a calcuation out, please include.
Thank you,
The Big Bus Company manufactures two products, Product 1 and Product 2. Product 2 was developed as an attempt to enter a market closely related to that of Product 1. Product 2 is the more complex of the two products, requiring three hours of direct labour time per unit to manufacture compared to one and one-half hours of direct labour time for Product 1. Product 2 is produced on an automated production line.
Overhead is currently assigned to the products on the basis of direct labour-hours. The company estimated it would incur a total of $396,000 in manufacturing overhead costs and produce 5,500 units of Product 2 and 22,000 units of Product 1 during the current year. Unit costs for materials and direct labour are: Product 1 Product 2 Direct Labour $7 $15 Direct material $9 $20 Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) Product 1 Product 2 Total Allocation Direct Labour hour / unit 1.5 3 396,000 / 49,500 units produced 22,000 5,500 8 total labour hour 33,000 16,500 49,500 overhead/unit 12 24 overhead/unit is calculated by direct LH x 8 Product 1 Product 2 Direct material 9 20 Direct labour 7 15 overhead/unit 16 35 cost/unit 32 70 b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: (5 marks) Expected Activity Activity Costs Pools Estimated Overhead Costs Product 1 Product 2 Total Machine set-ups required $170,000 700 1,000 1,700 Purchase orders issued 37,000 300 200 500 Machine-hours required 91,000 4,000 9,000 13,000 Maintenance requests issued 98,000 400 600 1,000 $396,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. Total Cost Product A Product B Machine Setups 170,000 70,000 100,000 purchase order 37,000 22,200 14,800 machine hours 91,000 28,000 63,000 maintenance requests 98,000 39,200 58,800 Total 396,000 159,400 236,600 22,000 5,500 overhead /cost 7..25 43..02 product 1 product 2 Direct Labour 9 20 direct material 7 15 overhead / unit 7..25 43.02. Unit/ cost 23..25 78.020.
Looking to achieve the highest grade possible, please see below. Please indicate if this answer is correct. IF I have left a calcuation out, please include.
Thank you,
The Big Bus Company manufactures two products, Product 1 and Product 2. Product 2 was developed as an attempt to enter a market closely related to that of Product 1. Product 2 is the more complex of the two products, requiring three hours of direct labour time per unit to manufacture compared to one and one-half hours of direct labour time for Product 1. Product 2 is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labour-hours. The company estimated it would incur a total of $396,000 in manufacturing overhead costs and produce 5,500 units of Product 2 and 22,000 units of Product 1 during the current year. Unit costs for materials and direct labour are: | ||||||||||||
Product 1 | Product 2 | |||||||||||
Direct Labour | $7 | $15 | ||||||||||
Direct material | $9 | $20 | ||||||||||
Required: | ||||||||||||
a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) | ||||||||||||
Product 1 | Product 2 | Total | Allocation | |||||||||
Direct Labour hour / unit | 1.5 | 3 | 396,000 / 49,500 | |||||||||
units produced | 22,000 | 5,500 | 8 | |||||||||
total labour hour | 33,000 | 16,500 | 49,500 | |||||||||
overhead/unit | 12 | 24 | overhead/unit is calculated by direct LH x 8 | |||||||||
Product 1 | Product 2 | |||||||||||
Direct material | 9 | 20 | ||||||||||
Direct labour | 7 | 15 | ||||||||||
overhead/unit | 16 | 35 | ||||||||||
cost/unit | 32 | 70 | ||||||||||
b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: (5 marks) | ||||||||||||
Expected Activity | ||||||||||||
Activity Costs Pools | Estimated Overhead Costs | Product 1 | Product 2 | Total | ||||||||
Machine set-ups required | $170,000 | 700 | 1,000 | 1,700 | ||||||||
Purchase orders issued | 37,000 | 300 | 200 | 500 | ||||||||
Machine-hours required | 91,000 | 4,000 | 9,000 | 13,000 | ||||||||
Maintenance requests issued | 98,000 | 400 | 600 | 1,000 | ||||||||
$396,000 | ||||||||||||
Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. | ||||||||||||
Total Cost | Product A | Product B | ||||||||||
Machine Setups | 170,000 | 70,000 | 100,000 | |||||||||
purchase order | 37,000 | 22,200 | 14,800 | |||||||||
machine hours | 91,000 | 28,000 | 63,000 | |||||||||
maintenance requests | 98,000 | 39,200 | 58,800 | |||||||||
Total | 396,000 | 159,400 | 236,600 | |||||||||
22,000 | 5,500 | |||||||||||
overhead /cost | 7..25 | 43..02 | ||||||||||
product 1 | product 2 | |||||||||||
Direct Labour | 9 | 20 | ||||||||||
direct material | 7 | 15 | ||||||||||
overhead / unit | 7..25 | 43.02. | ||||||||||
Unit/ cost | 23..25 | 78.020. | ||||||||||
Jarrod RobelLv2
8 Aug 2018