gn PALERImported From E Chase Paymentech FED EX Paycor Secur

gn PALERImported From E Chase Paymentech FED EX Paycor Secure Accessb Login I The Office COffice 363 ework Saved Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2 The following data are for the two products produced by Tadros Company. Product A Product B $26 per unit Direct materials $15 per unit 0.5 DLH per 1.4 DLH per unit 1.0 MH per unit 250 batches 2,000 units 50 Direct labor hours Machine hours Batches Volume unit 0.4 MH per unit 125 batches 10,000 units 10 Engineering modifications modifications Number of customers modifications 500 customers400 customers 95 per unit per unit Market price $35 per unit The company\'s direct labor rate is $20 per direct labor hour (DLH). Additional information follows Costs Driver Indirect manufacturing Engineering support $26,500 Engineer ing Electricity Setup costs modifications 24,000 Machine hours 40,000 Batches Nonmanufacturing Customer service 71,000 Number of customers Renirer Prex 5of5 Next

Solution

1. Manufacturing Cost per unit using plantwide rate Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Direct Labour hours $11.60 58,013 10,000 5.80 Product B Direct Labour hours $11.60 32,487 2,000 16.24 Plantwide overhead rate= Total overhead/Total labour hours                                     = $90,500/7,800                                     = $11.60 per labour hour Product A Product B No. of units 10,000 2,000 No. of hours 5,000 2,800 Direct Material 150,000 52,000 Direct Labor 100,000 56,000 Total Direct Costs 250,000 108,000 Manufacturing Overhead (Traditional Costing) 58,013 32,487 Total Product Cost 308,013 140,487 Per unit Cost 30.80 70.24 1.2 Gross Profit per unit is Product A Product B Market price $35 $95 Manufacturing Cost per unit -30.80 -70.24 Gross profit per unit 4.20 24.76 2.1 Gross profit per customer is Product A Product B Gross profit per unit 4.20 24.76 Units purchased per customer 20 5 Gross profit per customer 83.97 123.78 2.2 Cost of providing customer service to each customer is Activity Activity Cost Pool Cost driver Product A Product B Number of Customers 500 400 71,000*500/900 71,000*400/900 Customer service $71,000 No. of Customers 39,444 31,556 Per customer cost 78.89 78.89 Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate? Product A Product B Gross profit per customer 83.97 123.78 Customer service cost per customer (71,000/900) 78.89 78.89 Profit (loss) per customer 5.08 44.89 Is the profit adequate? Yes Yes