Springs Company produces two types of calculators, scientific and business. Both products pass through producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products:
Product Related Data
Scientific Business Total
Units produced per year 30,000 300,000
Prime Costs $100,000 $1,000,000 1,100,000
Direct Labor hours 40,000 400,000 440,000
Machine hours 20,000 200,000 220,000
Production runs 40 60 100
Inspection Hours 800 1,200 2,000
Maintenance hours 900 3,600 4,500
Department Data
Department 1 Department 2 Total
Direct labor Hours:
Scientific calculator 30,000 10,000 40,000
Business calculator 45,000 355,000 400,000
Total 75,000 365,000 440,000
Machine Hours:
Scientific calculator 10,000 10,000 20,000
Business calculator 160,000 40,000 200,000
Total 170,000 50,000 220,000
Overhead costs:
Setup costs $90,000 $90,000 180,000
Inspection costs 70,000 70,000 140,000
Power 100,000 60,000 160,000
Maintenance 80,000 100,000 180,000
Total $340,000 320,000 660,000
1) Compute the overhead cost per unit for each product using a plantwide, unit based rate.
Scientific calculator
Business calculator
2) Compute the overhead cost per unit for each product using departmental rates. In calculating
department rates use machine hours for department 1 and direct labor hours for department 2.
Scientific calculator
Business calculator
Repeat using direct labor hours for department 1 and machine hours for department 2.
Scientific calculator
Business calculator ,
3) Compute the overhead cost per unit for each product using activity based costing.
Scientific calculator
Business calculator