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dit Yiew Favorites Tools Help mywcuwKUWKU Webmail wou BlackboardWKU Topr etrT Helpdek wou Libra et u Undergraduate Catalog h wKU Herald )WKL Questions 3-4 jor 4) Problem 3-17A Contrast Activity-Based Costing and Conventional Product Costs ILO3 2, LO3-3, LO3-4 The following information applies to the questions displayed below Puget World, Inc, manulactures two models of television sets, the N 800 XL model and the N 500 model Dsta regarding the two products follow Direct L Hours per 30 10 Total Direct Model N 800 XL Model N 500 3,000 units 12,000 units 9.000 12,000 21,000 Additional information about the company follows a Model N 800 XL requires $75 in direct materials per unit, and Model N 500 requires $25 b. The drect labor wage rate is $18 per hour c The company has always used drect 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 specia equipment Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Theee actvny cost pools have been identhed as folows Activity Messure Estimated Activity Cost Pool Machine setups Number of setups Special processing Machine-hours General factory Direct lobor-hours Overhead Cost 360,000 65,000 1260,000 1,785,000 Number of setups 100 6,500 300 6,500 9,000 1200021,000 200 Direct labor-hours References Costing and Problem 3-17A Contrast Conventional Product Costs (L03-2.103-3, 1O34 Section Break

Explanation / Answer

1a Predetermined overhead rate = 1785000/21000= $85 per DLH b Model N 800 XL Model N 500 Direct materials 75 25 Direct labor 54 18 Overhead 255 85 Unit product cost 384 128 2a(1) Machine setup 1200 per setup =360000/300 Special processing 10 per MH =165000/16500 General factory 60 per DLH =1260000/21000 a(2) Model N 800 XL Model N 500 Machine setup 120000 240000 Special processing 165000 General factory 540000 720000 Total overhead 825000 960000 Divided by annual units 3000 12000 Overhead per unit 275 80 b Model N 800 XL Model N 500 Direct materials 75 25 Direct labor 54 18 Overhead 275 80 Unit product cost 404 123

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