22443 From IE costs per unit if any profit margin on sales b

22443 From IE costs per unit, if any? profit margin on sales be to meet the market selling price? $120 (dlh) 28 (b) Determine the factory overhead cost per unit 3. A $110,000. The new machine has a 5-year life with no residual value. The new machine would reduce annual oven with a book value of $67,000 has an estimated remaining 5 year life. A proposal is offered to sell the oven for $8,500 and replace it with costs by $23,000. Provide a different

Solution

a. Total Factory Overheads = Setups + Inspections + Assembly

= 60,000 + 120,000 + 280,000

= 460,000

Total assembly hours = 16,000 +12,000 = 28,000

Single plantwide factory overhead rate = Total Factory Overheads / Total Assembly Hours

= 460,000/ 28,000

= $16.43 (rounded off)

b. Small Lamps overhead cost = $16.43 *16,000 dlhs= 262,880

Factory overhead cost per unit for small lamps = 262,880/3000 = $87.62

Desk Lamps overhead cost = $16.43 *12,000 dlhs= 197,160

Factory overhead cost per unit for desk lamps = 197,160/6000 = $32.86

c.

d. Small Lamps total overhead cost = 8000 *2.5 + 9000 * 5 + 16000 * 11.67

= 251,720

Small Lamps factory overhead cost per unit = 251,720/ 3000 = $83.91

Desk Lamps total overhead cost = 16000 *2.5 + 15000 * 5 + 12000 * 11.67

= 255,040

Desk Lamps factory overhead cost per unit = 255,040/ 6000 = $42.51

e. There is difference in blanket overhead rate method of cost per unit and activity based costing method of cost per unit since in activity based costing costs are assigned as per cost per activity related to a product and traditional costing is on a average overhead rate.

Activity Pool	Activity Base	Budgeted Amount	Activity Rate ( Budgeted Amount/ Activity Base)
Setups	24,000	60,000	2.5
Inspections	24,000	120,000	5
Assembly	24,000	280,000	11.67