Value: 2.50 points Precision Manufacturing Inc. (PMI) makes two types of industr
ID: 2497251 • Letter: V
Question
Value: 2.50 points Precision Manufacturing Inc. (PMI) makes two types of industrial component parts--the Ex300 and the TX500. It annually produces 61,000 units of EX300 and 12,600 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the companys two product lines shown below: EX300 TX500 llllll Total Direct materials $367,325 $163,550 $530,875 Direct labor $121,000 43,000 $164,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead four as shown Activity Activity cost Pool Manufacturing Overhead EX300 TX500 Total (and Activity Measure) 207,900 91,000 63,000 Machining (machine-hours) 154,000 159,900 80 310 Setups (setup hours) 94,680 Product-level (number of products) General factory (direct labor dollars) 62,320 $121,000 S 43,000 164,000 Total manufacturing overhead cost S 524.800Explanation / Answer
1-a
Calculation of Plantwide overhead rate :
Total Manufacturing Overhead (A)
524800
Total Direct Labor ($) (B)
164000
Plantwide overhead rate =A/B
$ 3.20
Per Direct Labor $
1-b
Calculation of unit product cost:
EX300
TX500
Direct material
$ 6.0217
$ 12.9802
(367325 / 61000)
(163550 / 12600)
Direct Labor
$ 1.9836
$ 3.4127
(121000 / 61000)
(43000 / 12600)
Manufacturing Overhead
$ 6.3475
$ 10.9206
(1.9836*3.20)
(3.4127*3.20)
Unit product cost
$ 14.35
$ 27.31
2-a
Calculation of Activity Rate:
Activity Cost Pools
Overhead Amount
Total Activity
Activity Rate
A
B
A/B
Machining
$ 207,900
154000
$ 1.35
Per MH
Setups
$ 159,900
390
$ 410
Per Setup hr.
Product Level
$ 94,680
2
$ 47,340
Per product
General Factory
$ 62,320
$ 164,000
$ 0.38
Per DL$
1-b
Calculation of unit product cost:
EX300
TX500
Direct material
$ 6.0217
$ 12.9802
(367325 / 61000)
(163550 / 12600)
Direct Labor
$ 1.9836
$ 3.4127
(121000 / 61000)
(43000 / 12600)
Manufacturing Overhead (See calculations below)
$ 4.0815
$ 21.8913
Unit product cost
$ 12.09
$ 38.28
Calculation of Manufacturing Overhead:
EX300
Activity Cost Pools
Activity
Activity Rate
Overhead
A
B
A*B
Machining
91000
$ 1.35
$ 122,850
Setups
80
$ 410.00
$ 32,800
Product Level
1
$ 47,340.00
$ 47,340
General Factory
$ 121,000
$ 0.38
$ 45,980
Total Manufacturing Overhead (A)
$ 248,970
Number of units (B)
61000
Manufacturing Overhead Per unit = A/B
$ 4.08
TX500
Activity Cost Pools
Activity
Activity Rate
Overhead
A
B
A*B
Machining
63000
$ 1.35
$ 85,050
Setups
310
$ 410.00
$ 127,100
Product Level
1
$ 47,340.00
$ 47,340
General Factory
$ 43,000
$ 0.38
$ 16,340
Total Manufacturing Overhead (A)
$ 275,830
Number of units (B)
12600
Manufacturing Overhead Per unit = A/B
$ 21.89
1-a
Calculation of Plantwide overhead rate :
Total Manufacturing Overhead (A)
524800
Total Direct Labor ($) (B)
164000
Plantwide overhead rate =A/B
$ 3.20
Per Direct Labor $
1-b
Calculation of unit product cost:
EX300
TX500
Direct material
$ 6.0217
$ 12.9802
(367325 / 61000)
(163550 / 12600)
Direct Labor
$ 1.9836
$ 3.4127
(121000 / 61000)
(43000 / 12600)
Manufacturing Overhead
$ 6.3475
$ 10.9206
(1.9836*3.20)
(3.4127*3.20)
Unit product cost
$ 14.35
$ 27.31
2-a
Calculation of Activity Rate:
Activity Cost Pools
Overhead Amount
Total Activity
Activity Rate
A
B
A/B
Machining
$ 207,900
154000
$ 1.35
Per MH
Setups
$ 159,900
390
$ 410
Per Setup hr.
Product Level
$ 94,680
2
$ 47,340
Per product
General Factory
$ 62,320
$ 164,000
$ 0.38
Per DL$
1-b
Calculation of unit product cost:
EX300
TX500
Direct material
$ 6.0217
$ 12.9802
(367325 / 61000)
(163550 / 12600)
Direct Labor
$ 1.9836
$ 3.4127
(121000 / 61000)
(43000 / 12600)
Manufacturing Overhead (See calculations below)
$ 4.0815
$ 21.8913
Unit product cost
$ 12.09
$ 38.28
Calculation of Manufacturing Overhead:
EX300
Activity Cost Pools
Activity
Activity Rate
Overhead
A
B
A*B
Machining
91000
$ 1.35
$ 122,850
Setups
80
$ 410.00
$ 32,800
Product Level
1
$ 47,340.00
$ 47,340
General Factory
$ 121,000
$ 0.38
$ 45,980
Total Manufacturing Overhead (A)
$ 248,970
Number of units (B)
61000
Manufacturing Overhead Per unit = A/B
$ 4.08
TX500
Activity Cost Pools
Activity
Activity Rate
Overhead
A
B
A*B
Machining
63000
$ 1.35
$ 85,050
Setups
310
$ 410.00
$ 127,100
Product Level
1
$ 47,340.00
$ 47,340
General Factory
$ 43,000
$ 0.38
$ 16,340
Total Manufacturing Overhead (A)
$ 275,830
Number of units (B)
12600
Manufacturing Overhead Per unit = A/B
$ 21.89
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