Exercise 4-5 (Part Level Submission) Mobile Safes Walk-in Safes (a) LINK TO TEXT

Question

Exercise 4-5 (Part Level Submission)

Mobile Safes

Walk-in Safes

(a)

LINK TO TEXT

(b1)

Exercise 4-5 (Part Level Submission)

Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.

Mobile Safes

Walk-in Safes

Units planned for production 210 51 Material moves per product line 310 250 Purchase orders per product line 450 340 Direct labor hours per product line 810 1,710

(a)

Your answer is incorrect. Try again. The total estimated manufacturing overhead was $276,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.)
(1) One mobile safe

$

per unit (2) One walk-in safe

$

per unit

LINK TO TEXT

Attempts: 3 of 3 used

(b1)

Your answer is incorrect. Try again. The total estimated manufacturing overhead of $276,000 was comprised of $163,000 for materials handling costs and $113,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.)

What amount of materials handling costs are assigned to:
(a) One mobile safe

$

per unit (b) One walk-in safe

$

per unit

Explanation / Answer

Answer 1 Total estimated manufacturing overhead = $276000 Total direct labour hours = 810 + 1710 = 2520 hours Overhead rate = $276000 / 2520 hours = $109.5238 per hour Allocation of overheads under traditional costing (based on direct labour hours) Mobile safes Walk in safes Direct labour hours 810 1710 Overhead rate (in $ per hour) 109.5238 109.5238 Manufacturing Overheads                       88,714               1,87,286 Production units 210 51 Rate per unit                       422.45               3,672.27 One mobile safe = $422.45 per unit One Walk in safe = $3672.27 per unit Answer 2 Material handling overhead cost = $163000 Activity driver = Material moves Total number of material moves = 310+250 = 560 Activity rate = $163000 / 560 = 291.07 per material move Purchase activity overhead cost = $113000 Activity driver = Purchase orders Total number of purchase orders = 450+340 = 790 Activity rate = $113000 / 790 = 143.04 per order Mobile safes Walk in safes Material handling cost                 90,231.70             72,767.50 (No.of moves * Activity rate) Purchase activity cost                 64,368.00             48,633.60 (No.of orders*Activity rate) Total Overhead cost             1,54,599.70         1,21,401.10 Production units 210 51 Rate per unit                       736.19               2,380.41 One mobile safe = $736.19 per unit One Walk in safe = $2380.41 per unit

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