5 value: 3.50 points Precision Manufacturing Inc. (PMI) makes two types of indus

Question

5 value: 3.50 points Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 65,000 units of EX300 and 13,000 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below Direct materials Direct labor EX300 $371,325 $167,550 $538,875 $125,000 45,000 $170,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below Activity Cost Pool (and Activity Measure) Manufacturing Overhead EX300 95,000 TX500 65,000 350 Total $ 248,000 202,500 160,000 450 Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) 88,400 73,100 $125,000 $ 45,000 $ 170,000 Total manufacturing overhead cost $ 612.000 Required 1-a. Compute the plantvwide overhead rate that would be used in the company s conventional c Round your answer to 2 decimal places.)

Explanation / Answer

1a Plantwide overhead rate = 612000/170000= 3.6 per DL$ b Overhead allocated: EX300 450000 =125000*3.6 TX500 162000 =45000*3.6 EX300 TX500 Direct materials 371325 167550 Direct labor 125000 45000 Overhead 450000 162000 Total costs 946325 374550 Divided by annual production 65000 13000 Unit product cost 14.56 28.81 2a Machining 1.55 per MH =248000/160000 Setups 450 per setup hr =202500/450 Product level 44200 per product =88400/2 General factory 0.43 per DL$ =73100/170000 2b Overhead allocated: EX300 TX500 Machining 147250 100750 Setups 45000 157500 Product level 44200 44200 General factory 53750 19350 Total 290200 321800 EX300 TX500 Direct materials 371325 167550 Direct labor 125000 45000 Overhead 290200 321800 Total costs 786525 534350 Divided by annual production 65000 13000 Unit product cost 12.10 41.10

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