1 B D G 11 Sandstorm Manufacturing Inc. makes two types of industrial component parts the LE100 and the UL600. It annually produces 120,000 units of LE100 and 25,000 units of UL600. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labour dollars as the allocation base. Additional estimated information relating to the company's two product lines is shown below: 2 3 4 5 Direct materials cost 6 78 Direct labour cost 8 The estimated manufacturing overhead is $1,020,000. 9 Chapter formulas 1. Activity rate == Total cost in cost pool/total activity level LE100 $720,000 UL600 $357,000 $240,000 $100,000 2. Indirect costs applied to cost object - Activity rate x Activity level incurred by cost object 14 Required: 15 16 Part 1: Calculate the predetermined overhead rate based on direct labour cost and calculate the overhead cost per unit for each product. (3 marks) 781 9 0 Predetermined overhead rate Overhead cost per unit LE100 UL600 ufacturing 285 9 . Part 2: The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to the four activities as shown below: Manufacturing Activity Cost Pool (and activity measure) LE100 UL600 Total Overhead Machining (machine-hours) $400,000 36,000 135,000 Setups (setup-hours) $300,000 150 Product level (number of products) $200,000 600 2 171,000 750 4 General factory (direct labour dollars) $120,000 $240,000 $100,000 $340,000 $1,020,000 Calculate the overhead cost per unit for each product using activity-based costing. (7 marks) Calculate the overhead cost per unit for each product using activity-based costing. (7 marks) Overhead cost per unit LE100 UL600