Jigra Enterprise Jigra manufacturers wheel rims The companys

Jigra Enterprise (Jigra) manufacturers wheel rims. The company\'s accountant budgeted the flowing activity based costing (ABC) allocation rate for 2016 Activit Materials handlin Machine Setu Insertion of Parts Finishirn The number of parts is now a feasible allocation because Jigra recently purchased bar coding technology Jigra produces two wheel rim models: standard and deluxe. Budgeted data for 2016 is as follows Allocation Base Number of Parts Number of setups Number of parts Finishing direct labor hours Cost Allocation Rate 6 per part 600 per setu 24 per part 30 per hour Standard Deluxe 7.0 15.0 4.5 8.0 5.0 15.0 Parts per rim Setups per 1,000 rims Finishing direct labor hours per rim 3.0 Total direct labor hours per rim 5.0 The company expects to produce 1,000 units of each model during the year Required a) Compute the total budgeted indirect manufacturing cost for 2016 b) Compute the ABC indirect manufacturing cost per unit of each model. Carry each cost g the nearest cent c) Prior to 2016, Jigr used a direct labor hour single allocation base system. Compute the (single) allocation rate based on direct labor hours of 2016. Use this rate to determine the indirect manufacturing cos per wheel rim for each model, to the nearest cent

Solution

a) Calculation of Information for 1000 Units of each model -

Calculation of total budgeted indirect manufacturing cost -

b) Calculation using ABC

Note - Please refer table 1 of part a) for understanding the calculation in above table.

c) Calculation of Single allocation rate based on direct labour hour

Total direct labour hours = 5*1000 + 8*1000

                                      = 13000 Hours

Total indirect manufacturing cost = 603000 (Calculated in part a)

Allocation rate = 603000 / 13000

                       = $ 46.38 per hour

Mark - Efforts are made to make each calculation clearly. However in case of any doubt feel free to ask in comment section. :)

Particular	Standard Model (No.)	Deluxe Model (No.)
Rims	1000	1000
Parts	5*1000= 5000	7*1000= 7000
Setups	15	15
Finishing hours	3*1000 = 3000	4.5*1000= 4500
Total direct hours	5*1000= 5000	8*1000 = 8000