newconnectmheducationcom pter 17 Homework 6 The following da

newconnect.mheducation.com pter 17- Homework 6 The following data are for the two products produced by Tadros Company. Produet A $15 per unit $26 per unit Direct materials Direet labor hours Machine hours atehes Volune 1.4 DH per anit 1.0 MR Per unit 240 batehes 2.000 units 45 modifieations 400 eustoners 0.4 DEH per unit 0.3 per unit 120 batches 10,000 unsts Engineering modificationa9 Nunber of custoners 500 eustomers 95 per unit per Market price $36 per unit The company\'s direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Driver Indirect manufacturing Engineering support 26,000 Ingineering nodifications Eleetriesty Setup costs 20,000 Hachine houra 43,000 Batehes Nonmanafaoturing Cuatoner serviee 73,000 Sunber of custoner Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts sh indicated with minus sign.) Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. Overhead Assigned Aivy lntwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A 1 of 1 MacBook Air

Solution

Answer 1. Total Overhead = $26,000 + $20,000 + $43,000 = $89,000 Total labor Hours = (0.40 Hrs X 10,000 Units) Product A + (1.40 Hrs X 2,000 Units) Product B Total labor Hours = 6,800 DLH Plantwide Overhead Rate = $89,000 (Total Overhead) / 6,800 DLH = $13.09 per DLH (Approx.) Ovrehead Assigned Activity Driver Plantwide OH Rate Total Overhead Cost Units Produced OH Cost per Unit Product A              4,000 DLH             13.09 per DLH               52,352.94            10,000                         5.24 Product B              2,800 DLH             13.09 per DLH               36,647.06               2,000                       18.32 Product A Product B Direct Materials                           15.00             26.00 Direct Labor                             8.00             28.00 Overhead Cost                             5.24             18.32 Total manufacturing Cost per Unit                           28.24             72.32 Answer 1.2 Product A Product B Market Price                           36.00             95.00 Manf. Cost per Unit                           28.24             72.32 Gross Profit per Unit                             7.76             22.68 Answer 2.2 Product A Product B Gross Profit per Unit                             7.76             22.68 Units Purchase per Customer                           20.00               5.00 Gross Profit per Customer                         155.29          113.38 Cost of providing Customer Service to each customer = $73,000 (Customer Service Cost) / 900 Customers Cost of providing Customer Service to each customer = $81.11 per Customer (Approx.) Product A Product B Gross Profit per Customer                         155.29          113.38 Customer Service Cost per customer                           81.11             81.11 Gross Profit per Customer                           74.18             32.27 Profit is Adequate. Answer 3. Calculation of Overhead Rate Under ABC Method Activity Cost Pool Estimated Overhead Expected use of Cost Drivers Activity-Based Overhead rate Enginnering Support                         26,000                           54 Engg. Mod.            481.48 per Engg. Mod. Electricity                         20,000                     5,000 Mach Hrs                 4.00 per Mach Hr Setup Costs                         43,000                         360 batches            119.44 per batch Total                         89,000 Assigning Overhead Cost to Product Model Using ABC Method Activity Based Overhead Rate Product A Product B Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Enginnering Support                         481.48 per Engg. Mod.                         9 Engg. Mod.                       4,333               45 Engg. Mod.                21,667 Electricity                             4.00 per Mach Hr                3,000 Mach Hrs                     12,000         2,000 Mach Hrs                  8,000 Setup Costs                         119.44 per batch                    120 batches                     14,333            240 batches                28,667 Total                     30,667                58,333 No. of Units Produced                     10,000                  2,000 OH Cost per Unit                          3.07                  29.17 Total Manufacuring Cost Product A Product B Direct Material Per Unit                           15.00                     26.00 Direct Labor Per Unit                             8.00                     28.00 Overhead per Unit                             3.07                     29.17 Total Manf. Cost per Unit                           26.07                     83.17 Product A Product B Market Price Per Unit                           36.00                     95.00 Total Manf. Cost per Unit                           26.07                     83.17 Gross Profit per Unit                             9.93                     11.83 Product A Product B Gross Profit per Unit                             9.93                     11.83 Units Purchase per Customer                                 20                             5 Gross Profit per Cutomer                         198.67                     59.17 Answer 4. Product A Product B Gross Profit per Cutomer                         198.67                     59.17 Customer Service Cost per customer                           81.11                     81.11 Gross Profit per Customer                         117.56                   (21.94) Is profit Adeqaute using ABC Yes No Answer 5. Activity Based Costing method