Use the following to answer questions 18 and 19: Simba Corporation manufactures

Question

Use the following to answer questions 18 and 19: Simba Corporation manufactures three products. In the past, Simba has been using a traditional costing system in which manufacturing overhead was applied using a predetermined overhead rate of 150% of direct labor cost. Sensing the traditional costing system was distorting product costs; Simba is considering a switch to an activity-based costing system. Under activity-based costing, manufacturing overhead costs will be assigned to products using three activity cost pools. Information on these cost pools for next year is as follows: Estimated Overhead Cost $150,000 $180,000 $480,000 Activity Cost Pool Machine Setups Expected Activity 400 Setups Quality Control 1,500 Inspections 30,000 Machine hours Production Information on a per unit basis for the three products produced by Simba follows: Model #36 Model #58 odel #19 $400 $810 $540 $600 $310 $220 Direct material cost .. Number of setups Number of inspections... 10

Explanation / Answer

SOLUTION

18. Total per unit product cost for Model 36 is - $900

Unit product cost = Predetermined overhead rate * Direct labor cost

= 150% * $600 = $900

19. Total per unit product cost for Model 19 is - $934

Per unit cost = ($375 * 2) + ($120 * 1) + ($16 * 4)

= $750 + $120 + $64 = $934

Activity cost pool Estimated overhead cost ($) (A) Cost drivers (B) Activity based overhead rate (A/B) Machine setups 150,000 400 setups 375 Quality control 180,000 1,500 inspections 120 Production 480,000 30,000 machine hours 16

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

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