Product line data Products Production volume in units Standard Model Deluse Mode

Question

Product line data Products Production volume in units Standard Model Deluse Model Direct material cost Direct labor cost Direct labor hours Machine hours $434,000 S505,400 50,540 28,000 Total $734.000 $1,045.400 104.540 58,000 $300,000 | S540,000 54,000 30,000 Breakdown of company's total S1,183,200 factory overhead cost by production departments and by major factory overhead causing activities: By Department: Factory overhead costs Machine hours Direct labor hours Assembly Department Finishing Department Total $236.783 S1.183.200 58,000 104,540 41,300 4.790 16,700 89.750 Production Setup $296,180Number of setups 275,470 Maintenance hours of worked S611.550 Machine hours Factory Maintenance $1.183.200 Total number of setups Total maintenance hours worked in each area of production Number of machine hours 200 30,000 28,000 Requirements ?selling Pnce per unit-cogperunt + 145% Q1. Compute total cost per unit of Standard model and Deluxe model under each of the following methods for factory overhead cost allocation cost per untt a. Use of a plant-wide overhead rate based on direct labor hours (current practice of company). Determine selling price of each model based on company policy as well. b. Use of departmental overhcad rates-Assembly Department based on machine hours, and Finishing Department based on direct labor hours. Determine selling price of each model based on company policy as well. e. Use of Activity Based Costing under which a separate overhead rate would be used to assign each activity cost to product lines. Determine selling price of each model based on company policy as well. Q2. Based on the comments made by the President, what is the point that the President does not know or is missing? t system used by company, which of the two models is over-costed and which model is under-costed, if any?

Explanation / Answer

a)

b)

c)

Q2. Data not available to answer

Q3. Current system Vs ABC

Standard Model - Under-costed

Deluxe Model- Over- costed

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Total Overhead $        1,183,200 Total direct Labour Hours                104,540 Plant-wide Overhead Rate $                11.32

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