Problem:
(ABC) Illiad Inc. has a total of $2,362,500 in production overhead costs. The company's products and related statistics follow.
|
Product A
|
Product B
|
|
Direct material in pounds
|
139,500
|
190,500
|
|
Direct labor hours
|
30,000
|
37,500
|
|
Machine hours
|
52,500
|
22,500
|
|
Number of setups
|
430
|
860
|
|
Number of units produced
|
15,000
|
7,500
|
Additional data: The 330,000 pounds of material were purchased for $544,500. One direct labor hour costs $12.
a. Assume that Illiad Inc. uses direct labor hours to apply overhead to products. Determine the total cost for each product and the cost per unit.
b. Assume that Illiad Inc. uses machine hours to apply overhead to products. Determine the total cost for each product and the cost per unit.
c. Assume that Illiad Inc. uses the following activity centers, cost drivers, and costs to apply overhead to products:
|
Cost Pool
|
Cost Driver
|
Cost
|
|
Utilities
|
# of machine hours
|
$ 750,000
|
|
Setup
|
# of setups
|
193,500
|
|
Material handling
|
# of pounds of material
|
1,419,000
|
Determine the total cost for each product and the cost per unit.