Harrison Company makes two products and uses a traditional costing system in whi
ID: 2336216 • Letter: H
Question
Harrison Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:
These products are customized to some degree for specific customers.
The company's manufacturing overhead costs for the year are expected to be $376,650. Using the company's traditional costing system, compute the unit product costs for the two products. (Round your intermediate calculations and final answers to 2 decimal places.)
Management is considering an activity-based absorption costing system in which half of the overhead would continue to be allocated on the basis of direct labor-hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year:
Compute the unit product costs for the two products using the proposed activity-based absorption costing system. (Round your intermediate calculations and final answers to 2 decimal places.)
Harrison Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:
Explanation / Answer
Direct labour hours required for Rascon = 11,000 units * 0.2 hours per unit = 2,200
Direct labour hours required for Parcel = 47,000 units * 0.25 hours per unit = 11,750
Total number of direct labour hours = 2,200 + 11,750 = 13,950
Predetermined overhead rate = Manufacturing overhead / Number of direct labour hours
= $376,650 / 13,950
= $27 per direrct labour hour
2.
Overhead allocated on the basis of direct labour hours = $376,650 / 2 = $188,325
Pre determined overhead cost per direct labour hour = $188,325 / 13,950
= $13.5
Predetermined overhead cost per engineering hour = $188,325 / 8,600
= $21.90
Rascon Parcel Direct materials $15 $7 Direct labour $2.9 $3.8 Manufacturing Overhead $5.4 (0.2*$27) $6.75 (0.25*$27) Product cost per unit $23.3 $17.55Related Questions
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