Allocation of Manufacturing Overhead with Multiple Products Geddy, Inc., is a manufacturing firm that manufactures two types of boat engines. The Type A engine is designed for a specific type of cruise ship. Because of a long-term commitment with a cruise company, Type A engines need no modifications. Type B engines are designed for slightly smaller cruise ships. Because the Type B engine is designed for several different models of cruise ships and the mounting hardware is different for each, retooling is regularly required. Costs for the two types of engines are presented here:

Required:
1. Determine the amount of manufacturing overhead to be assigned to each unit of activity assuming the following ABC information:
Manufacturing overhead costs Type A Engines • Engineering costs • 0 engineering change orders per unit • Quality control • 9 machine setups per unit • Utilities and maintenance • 200 units produced Allocation Bases Type B Engines • Engineering change orders per unit • 8 engineering change orders per unit • Machine setups per unit • 16 machine setups per unit • Production volume • 90 units produced 2. Determine the amount of manufacturing overhead to be assigned to each type of engine.
3. Compute the gross margin on Type A and Type B engines assuming selling prices of $2,000,000 and $2,300,000, respectively.

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Type A Engine (200 Units Produced) Type B Engine (90 Units Produced) Total Per Unit Total Per Unit Direct materials cost $176,000,000 $880,000 $70,200,000 $780,000 Direct labor cost 147,000,000 735,000 60,300,000 670,000 Manufacturing overhead costs: Engineering costs Quality control Utilities and maintenance $144,000,000 38,880,000 1,305,000