(Activity-based costing) Goldstein and Marcus Company manufactures two products.

Following is a production and cost analysis for each product for the year 1997.

Roberto Lopez, the firm’s cost accountant, has just returned from a seminar on activity-based costing. To apply the concepts he has learned, he decides to analyze the costs incurred for Products A and B from an activity basis. In doing so, he specifies the following first and second allocation processes:

a. Determine the total overhead for Goldstein and Marcus Company.

b. Determine the plantwide overhead rate for the company, assuming the use of direct labor hours.

c. Determine the cost per unit of Product A and Product B, using the overhead application rate found in part b.

d. Using activity-based costing, determine the cost allocations to departments (first-stage allocations). Allocate in the following order: Building occupancy, Purchasing, and Power.

e. Using the allocations found in part

d, determine the cost allocations to prod¬ ucts (second-stage allocations).

f. Determine the cost per unit of Product A and Product B using the overhead allocations found in part e.LO1

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PRODUCT PRODUCT COST COMPONENT A B BOTH PRODUCTS COST Units produced 10,000 10,000 20,000 Raw materials used (units) X 50,000 50,000 100,000 $ 800,000 Y 100,000 100,000 $ 200,000 Labor hours used Department 1: $ 681,000 Direct labor ($375,000) 20,000 5,000 25,000 Indirect labor Inspection 2,500 2,500 5,000 Machine operations 5,000 10,000 15,000 Setups 200 200 400 Department 2: $ 462,000 Direct labor ($200,000) 5,000 5,000 10,000 Indirect labor Inspection 2,500 5,000 7,500 Machine operations 1,000 4,000 5,000 Setups 200 400 600 Machine hours used Department 1 5,000 10,000 Department 2 5,000 20,000 Power used (kw-hours) 15,000 $ 400,000 25,000 $ 800,000 $ 400,000 Department 1 1,500,000 Department 2 8,500,000 Other activity data: Building occupancy Purchasing $1,000,000 $ 100,000 Number of purchase orders Material X 200 Material Y 300 Square feet occupied Purchasing Power Department 1 Department 2 10,000 40,000 200,000 250,000