Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:
| Direct Labor Hours per Unit |
Annual Production | Total Direct Labor Hours |
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| Model N 800 XL | 1.8 | 5,000 units | 9,000 |
| Model N 500 | 0.9 | 29,500 units | 26,550 |
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| 35,550 | |||
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| Additional information about the company follows: |
| a. |
Model N 800 XL requires $73 in direct materials per unit, and Model N 500 requires $48. |
| b. | The direct labor wage rate is $11 per hour. |
| c. |
The company has always used direct labor hours as the base for applying manufacturing overhead cost to products. |
| d. |
Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows: |
| Activity Cost Pool | Activity Measure |
Estimated Overhead Cost |
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| Machine setups | Number of setups | $ | 355,000 |
| Special processing | Machine hours | 173,000 | |
| General factory | Direct labor hours | 1,266,000 | |
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| $ | 1,794,000 | ||
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Expected Activity |
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| Activity Measure | Model N 800 XL | Model N 500 | Total |
| Number of setups | 50 | 100 | 150 |
| Machine hours | 12,000 | 0 | 12,000 |
| Direct labor hours | 9,000 | 26,550 | 35,550 |
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2 16 2011
1. value:
7.00 points
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Required: |
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| 1. | Assume that the company continues to use direct labor hours as the base for applying overhead cost to products.(Do not round intermediate calculations.Round your answers to 2 decimal places.) |
| a. | Compute the predetermined overhead rate. |
| Predetermined overhead rate | $ per DLH | |
| b. | Compute the unit product cost of each model. |
| Model N 800 XL | $ |
| Model N 500 | $ |
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referencesebook & resources
2. value:
8.00 points
| 2. | Assume that the company decides to use activity based costing to assign manufacturing overhead cost to products. |
| a(1) |
Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) |
| Machine setup | $ | per setup |
| Special processing | $ | per MH |
| General factory | $ | per DLH |
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| a(2) |
Determine the amount of overhead cost that would be assigned to each model using the activity based costing system. (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Model N 800 XL | Model N 500 | |
| Overhead cost per unit | $ | $ |
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| b. |
Compute the unit product cost of each model. (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Model N 800 XL | Model N 500 | |
| Unit product cost | $ | $ |