S19-8 Using ABC to compute product coets per unlt Elm Corp. makes two products C

Question

S19-8 Using ABC to compute product coets per unlt Elm Corp. makes two products Cand D. The following data have been summarzed Product CProduct D Direct materials cost per unit Direct labor cost per unit Indirect manufacturing cost per unit s 500 600 5 2,100 100 Indirect manufacturing cost information indludes the following Predetermined Overhead Allocation Rate S 1.200 per setup S Activity Product C Product D 35 setups 1.150 MHr 75 setups 3,650 MHr Setup Machine maintenance 14 per MHr S19-8 Requirement The company plans to manufacture 250 units of each product. Calculate the product cost per unit for Product C and D using activity-based costing

Explanation / Answer

Question - 1

(1) Direct material cost per unit and labor cost per unit is multiplied with 250 units in each case.

(2) Overhead is calculated by muliplication of activity with overhead rate. For example setup = 1200 * 35 for product - C and 1200 * 75 for product - D

Question - 2

Variable cost ratio = 30 %. Hence Contribution Margin ratio = 100 - 30 = 70 %

Equation approach .............

Sales needed = ( Fixed cost + Desired profit ) / Contribution ratio

= ( 35000 + 14000 ) / 0.70 = 70000 ........ dollar revenue needed

Note

Fixed cost amount in dollars and variable cost % are calculated as under

Product - C Product - D Direct materials 125000 525000 Direct labor 150000 25000 Overhead Setup 42000 90000 Machine maintenance 16100 51100 Total Product cost 333100 691100 Product cost per Unit 1332.4 2764.4

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.