Question
Activity Cost Pool Activity Rate Labor-related per DLH Machine-related per MH Machine setups per setup Production orders per order Product testing per test Packaging per
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2.
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Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:
Activity Cost Pool | Estimated Overhead Cost | Expected Activity | |||
Labor-related | $ | 19,600 | 10,000 | direct labor-hours | |
Machine-related | $ | 7,000 | 7,000 | machine-hours | |
Machine setups | $ | 23,400 | 600 | setups | |
Production orders | $ | 16,500 | 500 | orders | |
Product testing | $ | 22,400 | 800 | tests | |
Packaging | $ | 62,900 | 3,700 | packages | |
General factory | $ | 60,000 | 10,000 | direct labor-hours | |
2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.)
3.
Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 49,000 units next year and Product L is expected to sell 9,800 units. A unit of either product requires 0.6 direct labor-hours.
The company's total manufacturing overhead for the year is expected to be $2,998,800.
Required:
1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product?
1-b. Compute the total amount of overhead cost that would be applied to each product.
2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,499,400 assigned to Product H and $1,499,400 assigned to Product L.
If this suggestion is followed, how much overhead cost per unit would be assigned to each product?
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