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3 Search the web.. c a Search the web... -citycar es-Yaho XVEMcGraw-HillConnectmWDCh17Problemis)--zyeTheFollowingDataAre, ? | eztormheducation.com/hm. tpx?-0.10176952770055625 1530393994937 Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2 The following data are for the two products produced by Tadros C Product AProduct B 0 4 DLH per un 14 DLH per uni Direct materials Direct labor hours Machine hours Batches Volume Engineering modificatbons 9 modifications 45 modific ations Number of customers Market price 3 14 per unit $ 28 per unit 0 3 MH per unit 1.0 MH per unit 10,000 units 500 customers 400 customers 9D batches 180 batches 2.000 units s 34 per unit $ 95 per unit The company's direct labor rate is $20 per direct labor hour (DLH Additional information tallows Costs Driver Indirect manufacturing Enginering support2 Electricity 5 24000 Engineering modifcatons 20 000 Machine hours 41.000 Batches 75.000 Number of customers Setup costs Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounits should be indicated with minus sign.) Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours

Explanation / Answer

Answer 1. Total Overhead = $24,000 + $20,000 + $41,000 = $85,000 Total labor Hours = (0.40 Hrs X 10,000 Units) Product A + (1.40 Hrs X 2,000 Units) Product B Total labor Hours = 6,800 DLH Plantwide Overhead Rate = $85,000 (Total Overhead) / 6,800 DLH = $12.50 per DLH (Approx.) Ovrehead Assigned Activity Driver Plantwide OH Rate Total Overhead Cost Units Produced OH Cost per Unit Product A              4,000 DLH             12.50 per DLH               50,000.00            10,000                         5.00 Product B              2,800 DLH             12.50 per DLH               35,000.00               2,000                       17.50 Product A Product B Direct Materials                           14.00             28.00 Direct Labor                             8.00             28.00 Overhead Cost                             5.00             17.50 Total manufacturing Cost per Unit                           27.00             73.50 Answer 1.2 Product A Product B Market Price                           34.00             95.00 Manf. Cost per Unit                           27.00             73.50 Gross Profit per Unit                             7.00             21.50 Answer 2.2 Product A Product B Gross Profit per Unit                             7.00             21.50 Units Purchase per Customer                           20.00               5.00 Gross Profit per Customer                         140.00          107.50 Cost of providing Customer Service to each customer = $75,000 (Customer Service Cost) / 900 Customers Cost of providing Customer Service to each customer = $83.33 per Customer (Approx.) Product A Product B Gross Profit per Customer                         140.00          107.50 Customer Service Cost per customer                           83.33             83.33 Gross Profit per Customer                           56.67             24.17 Profit is Adequate. Answer 3. Calculation of Overhead Rate Under ABC Method Activity Cost Pool Estimated Overhead Expected use of Cost Drivers Activity-Based Overhead rate Enginnering Support                         24,000                           54 Engg. Mod.            444.44 per Engg. Mod. Electricity                         20,000                     5,000 Mach Hrs                 4.00 per Mach Hr Setup Costs                         41,000                         270 batches            151.85 per batch Total                         85,000 Assigning Overhead Cost to Product Model Using ABC Method Activity Based Overhead Rate Product A Product B Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Enginnering Support                         444.44 per Engg. Mod.                         9 Engg. Mod.                 4,000.00               45 Engg. Mod.          20,000.00 Electricity                             4.00 per Mach Hr                3,000 Mach Hrs               12,000.00         2,000 Mach Hrs            8,000.00 Setup Costs                         151.85 per batch                      90 batches               13,666.67            180 batches          27,333.33 Total               29,666.67          55,333.33 No. of Units Produced                     10,000                  2,000 OH Cost per Unit                          2.97                  27.67 Total Manufacuring Cost Product A Product B Direct Material Per Unit                           14.00                     28.00 Direct Labor Per Unit                             8.00                     28.00 Overhead per Unit                             2.97                     27.67 Total Manf. Cost per Unit                           24.97                     83.67 Product A Product B Market Price Per Unit                           34.00                     95.00 Total Manf. Cost per Unit                           24.97                     83.67 Gross Profit per Unit                             9.03                     11.33 Product A Product B Gross Profit per Unit                             9.03                     11.33 Units Purchase per Customer                                 20                             5 Gross Profit per Cutomer                         180.67                     56.67 Product A Product B Gross Profit per Cutomer                         180.67                     56.67 Customer Service Cost per customer                           83.33                     83.33 Gross Profit per Customer                           97.33                   (26.67) Is profit Adeqaute using ABC Yes No

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