EMD complex of the two products requiring one hour of direct

EMD complex of the two products, requiring one hour of direct labor time per unit to manufacture Corporation manufactures two products, Product S and Product W. Product W is the more compared to one-half hour of direct labor time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labor are: Direct material Direct labor Product S S 10 Product W $ 24 12 Required: a. Compute the predetermined overhead rate under the current method of allocating b. Determine the total cost of a finished unit under the current method of allocating c. The company\'s overhead costs can be attributed to four major activities. These activities overhead. overhead and the amount of overhead cost attributable to each for the current year are given below: Total Activity Total Cost Product S Product W Total 800 500 Activity Cost Pool 1,200 2,000 100 600 S 200,000 Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued 43,500 104,000 3,000 10,000 13,000 152,500 860 1,140 2,000 500,000 Using the data above and an activity-based costing approach, determine the application rate for each cost pool. d. e the total cost of a finished unit under an activity-based costing approach.

Solution

c)

a)	Predetermined overhead cost=Estimated manufacturing cost/Estimated direct labor hours
	=$500,000/40000
	=$12.5 per hour
	The working of 1,00,000 direct labor-hours during the current year is as below.
	Product S:60000 units *0.5 hour=30000 hours
	Product W: 10000 units*1 hours=10000 hours
	30000 hrs +10000 hrs =40000 hrs