Yardcare Inc. manufactures and distributes two types of gardening tools: rakes a
ID: 2436932 • Letter: Y
Question
Yardcare Inc. manufactures and distributes two types of gardening tools: rakes and shovels The tools are manufactured on a common assembly line by the same direct labourers Different direct materials are used in each type of tool, and the machinery is retooled for each product. Until now, manufacturing overhead costs have been allocated on the basis of direct labour hours using a plant-wide rate. However, the production manager wants to implement activity- based costing for Yardcare's production operations. To that end, she has assembled the information below regarding production activities and manufacturing overhead costs for all units produced for the month of May Activity used in rakes Activity used Activity centre Materials handling Machining Assembly Inspection Cost driver Allocation rate in shovels Number of parts $1.00 per part 2,000 parts 1,300 parts Machine-hours Units assembled Number tested $15.00 per hour $1.60 per unit $2.00 per unit 205 hours 1,000 units 100 units 300 hours 1,300 units 1,200 units Direct costs Rakes Shovels Labour (600 hours each) Materials $12,000 $ 5,200 $12,000 $ 2,600 1. Using a plant-wide manufacturing overhead rate based on direct labour hours, what are the total manufacturing costs per unit for rakes for May? (Compute the plant-wide rate to the nearest cent.) a) $14.30 b) $17.83 c) $19.60 d) $25.78Explanation / Answer
total manufacturing overhead Materials handling (3300*1)= 3300 Machining (15*505)= 7575 Assembly (1.6*2,300)= 3680 Inspection (2*1,300)= 2600 total manufacturing overhead 17155 overhead rate = 17155/1200 14.29583 total manufacturing costs per unit $ labour 12,000 Materials 5,200 overhead rate (14.29583*600)= 8577.5 total manufacturing cost 25,778 manufacturing cost per unit = 25778/1000 25.78 option d) $25.78
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