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A Alpha Company manufactures two products, Product A and Product B. The company estimated it would incur $119,100 in manufacturing overhead costs during the current
A Alpha Company manufactures two products, Product A and Product B. The company estimated it would incur $119,100 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below: Required: a. Compute the predetermined overhead rate under the current (traditional) method, and determine the unit product cost of each product for the current year. (7 marks) b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labour hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below: Determine the unit product cost of each product for the current period using the activity-based costing approach. (18 marks) B. Chin Ho Company makes three products in a single facility. Data concerning these products follow: The mixing machines are potentially the constraint in the production facility. A total of 32,400 minutes is available per month on these machines. Direct labour is a variable cost in this company. Required: a. How many minutes of mixing machine time would be required to satisfy demand for all four products? (3 marks) b. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.) (18 marks) c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.) (4 marks)
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