Burn Company makes two products and uses a convectional costing system in which

Question

Burn Company makes two products and uses a convectional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow: These products are Customized to some degree for specific customers. Required: 1. The company's manufacturing overhead costs for the year are expected to be $336,000. Using the company's conventional costing system, compute the unit product costs for the two products. 2. Management is considering an activity-based costing system in which half of the overhead would continue to be allocated on the basis of direct labor-hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year:

Explanation / Answer

Answer 1. Predetermined Overehead Rate per DLH = Total overehad / Total DLH Calculation of DLH Hot - 0.20 Hrs X 10000 Units              2,000 Heat - 0.25 Hrs X 48000 Units            12,000 Total DLH            14,000 Predetermined Overehead Rate per DLH = $336000 / 14000 Hrs = $24 per DLH Calculation of unit Product Cost Hot Heat Direct Material              10.00                 8.00 Direct Labor                 3.00                 3.75 Overhead Cost Hot - $24 X 0.20 DLH                 4.80 Heat - $24 X 0.25 DLH                 6.00 Total Cost Per Unit              17.80               17.75 Answer 2. Calculation of Overhead Rate per Hr. as per ABC Costing Overhead Basis Predetermined O. Rate General Overhead 168000 DLH 12 Per DLH (168000 / 14000 DLH) Engineering Design Overhead 168000 Design Time 21 Per Design Hr (168000 / 8000 DLH) Alloctaion of Overhead As per ABC Costing Hot Heat General Overhead          144,000 Hot - 2000 DLH X $12            24,000 Heat - 12000 DLH X $12                      -   Engg. Design Overhead            84,000 Hot - 4000 Design Hrs X $21            84,000 Heat - 4000 Design Hrs X $21            84,000 Total Allocated Overhead          108,000          312,000 Unit Produced            10,000            48,000 Ovehead Cost per Unit              10.80                 6.50 Calculation of unit Product Cost As per ABC Costing Hot Heat Direct Material              10.00                 8.00 Direct Labor                 3.00                 3.75 Overhead Cost              10.80                 6.50 Total Cost Per Unit              23.80               18.25

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.