,sandy Corporation manufactures two products: Tricycles and Wagons. The annual p
ID: 2511936 • Letter: #
Question
,sandy Corporation manufactures two products: Tricycles and Wagons. The annual production and sales of neycles is 2,200 units, while 1,750 units of Wagons are produced and sold. The company has traditionally sed direct labor hours to allocate its overhead to products. Tricycles require 2 direct labor hours per unit, Wagons require 1.5 direct labor hours per unit. The total estimated overhead for the period is $385,125. The company is looking at the possibility of changing to an activity-based costing system for its products. If the while company used an activity-based costing system, it would have the following three activity cost pools: Expected activity Estimated overhead Activity cost pool Setup costs Engineering costs Maintenance costs Total S 58,200 10,800 s 316,125 S 385,125 Tricycles 35 75 4.400 Wagons Total 120 120 7,025 85 45 2,625 Required: a. Calculate the unit cost for a Wagon using the traditional system based on a single plantwide overhead rate (use direct labor hours as the cost driver). b. Calculate the unit cost for a Wagon using the activity-based costing system.Explanation / Answer
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Req a: Total labour hours: Tricycle Wagon Total Number of units 2200 1750 Labour hour per unit 2 1.5 Total DLH 4400 2,625 7025 Pre-determined OH rate: Estimated OH / Total DLH = 385125/7025= 54.822 Per DLH Overhead assigned for Wagon: Overheads (2625 hours @ 54.822) 143907.75 Divide: Nnumber of Units 1,750 Unit cost of overheads 82.23 Req b: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL AND ACTIVITY ALLOCATED TO WAGON Total Expected Activity Activity consumed Activity Cost ACTIVITY COST POOL Overheads Activity Rate Wagon Assigned to Wagon Setup cost 58,200 120 485.00 85 41225 Engineering cost 10,800 120 90.00 45 4050 maintenance cost 316,125 7,025 45.00 2625 118125 Total Activity cost 163400 Divide: Number of Units 1750 Activity cost per unit 93.37Related Questions
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