Chan Company identified the following activities, costs, and activity drivers. T

Question

Chan Company identified the following activities, costs, and activity drivers. The company manufactures two types of go-karts: Fast and Standard. Production volume is 10,000 units of the Fast model and 30,000 units of the Standard model. Compute a single plantwide overhead rate assuming that the company assigns overhead based on 100.000 budgeted direct labor hours. Assign overhead costs to each model assuming the Fast model requires 25,000 direct labor hours and the Standard model requires 60,000 direct labor hours. What is the overhead cost per unit for each model?

Explanation / Answer

Chan Company Activity   Cost $ Handling Materials        625,000.00 Inspecting products        900,000.00 Processing Pos        105,000.00 Paying suppliers        175,000.00 Insuring factory        300,000.00 Designing Packaging        375,000.00 Total Overhead costs    2,480,000.00 Budgeted Direct Labor Hrs        100,000.00 1 Plant wise Overhead rate per Direct Labor hour $              24.80 2 Model Total DL Hrs requierd Plantwide OH rate Total OH cost Units produced OH cost per unit Fast Model          25,000.00             24.80            620,000          10,000              62.00 Standard Model          60,000.00             24.80        1,488,000          30,000              49.60

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