the data for two products of Gitano Manufacturing. (Loss amounts should be indic

Question

the data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places) Product A 11,500 units 0.16 DLH per unit 0.29 DLH per unit 1,400 units Direct labor cost(@$29 per DLH) Direct materials cost $ 1.6 per unit $ 2.3 per unit $ 90,760 52,000 70,610 $213,370 Required costs the total production cost per unit for each product Activity Plantwide OH rate Total Cost Units Product B

Explanation / Answer

Part A)

The predetermined/plantwide overhead rate per hour is calculated as follows:

Predetermined Overhead Rate = Total Estimated Overheads/Total Direct Labor Hours

Total Direct Labor Hours = 11,500*0.16+1,400*0.29 = 2,246 hours

Predetermined Overhead Rate = 213,370/2,246 = $95 per hour

________

The total production cost per unit for each product is calculated as follows:

____________

Part B)

The profit or loss per unit is calculated with the use of following table:

____________

Part C)

The overhead activity rates are calculated with the use of following table:

________

The total production cost per unit for each product is calculated as follows:

____________

Part D)

The profit or loss per unit under ABC is calculated with the use of following table:

Yes, this information should influence company strategy as Product B would be generating a loss of -$51.61 under activity based costing, while it was providing profit under traditional costing.

Product A Product B Direct Material 1.6 2.3 Direct Labor Cost 4.64 (.16*29) 8.41 (.29*29) Overhead 15.2 (.16*95) 27.55 (.29*95) Total Production Cost Per Unit $21.44 $38.26

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