Ellis Perry is an electronics components manufacturer. Information about the company’s two products follows:

The company incurs $840,000 in overhead per year and has traditionally applied overhead on the basis of direct labor hours.

Required

a. How much overhead will be allocated to each product using the traditional direct labor hours allocation base? What overhead cost per Unit will be allocated to each product?

b. Assume that Ellis Perry has identified three activity cost pools.

Given these activity pools and cost drivers, how much overhead should be allocated to each product? What overhead cost per unit will be allocated to each product?

c. Explain the change in overhead costs per unit.

Transcribed Image Text:

AM-2 FM-9 Units produced Direct labor hours required for production Units per batch Shipping weight per unit 20,000 4,000 10,000 15,000 4,000 400 0.5 lbs. 10.0 lbs.