1a. predetermined manufacturing overhead rate:
40,000 units of Mono relay x.75 per unit = 30,000
10,000 units of Bi relay x 1.00 per units =10,000
Total direct labor hours required =40,000 hours
Predetermined manufactured overhear rate = $1,000,000 / 40,000 = $25.00 per DLH
1b. Unit product cost of each product:
Mono relayBi-relay
Direct materials$35.00$48.00
Direct labor$9.00$12.00
$25.00 x .75$28.75
$25.00 x 1.00$25.00
________________________________
Unit product cost$62.75$85.00
—————————————————–
——————————————————
2. Activity rate: estimated overhead cost / total expected activity= activity rate.
Activity cost poolEst. overhead costExpected activityActivity rate
Maintaining parts
Inventory$180,000225 part types$800 per part type
Processing Purchase
Orders$90,0001.000 orders $90 per order
Quality control $230,0005,750 test$40 per test
Machine related$500,00010,000 MH$50 per MH
3A. Determine total amount of manufacturing overhead cost that would be applied to each product using the activity-based costing system. After these totals have been computed, determine the amount of manufacturing overhead cost per unit of each product.
Mono –RelayBi- Relay
Expected ActivityAmountExpected activity Amount
Maintinig parts Inv.75$60.000150$120,000
@$800
ProcessingPurchase 800$72,000200$18.000
Orders @$90
Quality Control @2,500$100,0003.250$130,000
$40
Machine related4.000$200.0006.000$300,000
@50
Total manufacturing
Overhead cost $432.000$568,000
Units produced 40,00010,000
Manufacturing Overhead
Per Unit$10.80$56.80
3B.Compute the unit product cost of each product.
Mono-RelayBi-relay
Direct Materials$35 $48
Direct labor$9$12
Manufacturing overhead$10.80$56.80
Unit Product Cost$54.80 $116.80
——————————————————
——————————————————
4. Identify factors that may account for the company’s declining profits?