Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:
|
Direct Labor-
Hours per Unit |
Annual Production |
Total Direct
Labor-Hours |
| Model N 800 XL |
1.8 |
4,500 units |
8,100 |
| Model N 500 |
0.9 |
29,000 units |
26,100 |
|
|
|
|
|
|
|
34,200 |
|
|
|
|
|
| Additional information about the company follows: |
| a. |
Model N 800 XL requires $71 in direct materials per unit, and Model N 500 requires $56.
|
| b. |
The direct labor wage rate is $12 per hour. |
| c. |
The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.
|
| d. |
Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:
|
| Activity Cost Pool |
Activity
Measure |
Estimated
Overhead Cost |
| Machine setups |
Number of setups |
$ |
358,000 |
| Special processing |
Machine-hours |
|
175,000 |
| General factory |
Direct labor-hours |
|
1,268,000 |
|
|
|
|
|
|
$ |
1,801,000 |
|
|
|
|
|
|
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 |
8,100 |
26,100 |
34,200 |
1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.(Do not round intermediate calculations.Round your answers to 2 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 to assign manufacturing overhead cost to products.
Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
|
|
|
| Machine setup |
$ |
per setup |
| Special processing |
$ |
per MH |
| General factory |
$ |
per DLH |
Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
|
Model N 800 XL |
Model N 500 |
| Overhead cost per unit |
$ |
$ |
b.Compute the unit product cost of each model. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
|
Model N 800 XL |
Model N 500 |
| Unit product cost |
$ |
$ |