Cartech Manufacturing Product Costs Part 1

You, as the staff accountant for Wake Consulting Group, have uncovered the following costs and activities associated with the two products.

	Part 271	Part 342
Production	500,000	100,000
Selling Price	$31.86	$24.00
Prime costs per unit	$9.53	$8.26
Number of production runs	100	200
Receiving orders	400	1,000
Machine hours	125,000	60,000
Direct labor hours	250,000	22,500
Engineering hours	5,000	5,000
Material moves	500	400

Overhead is allocated using a plant-wide rage based on direct labor hours.

Overhead Cost Pools
Setup costs	$240,000
Material handling costs	$900,000
Machine costs	$1,750,000
Receiving costs	$2,100,000
Engineering costs	$1,500,000
General plant costs	$500,000
Total	$6,990,000

Part 1: Compute overhead and gross margin using traditional costing.
	Per unit	Part 271	Part 342
	Selling Price	$	$
	Product Cost
	Prime costs	$	$
	Overhead	$	$
	Total Product Cost	$	$
	Total Profit	$	$

Part 2: Select the best cost driver and compute overhead rates for each cost pool.
	Cost Pool	Cost Driver	Overhead Rate
	Setup costs		$
	Material handling costs		$
	Machine costs		$
	Receiving costs		$
	Engineering costs		$
	General plant costs		$

Part 3: Compute overhead and gross margin using Activity-based costing.
	Per unit	Part 271	Part 342
	Selling Price	$	$
	Product Cost
	Prime costs	$	$
	Overhead	$	$
	Total Product Cost	$	$
	Total Profit	$	$

Part 4: Recommendations Management wants to see what the result is by increasing the price for Product 342 by 25%.
Per unit	Part 271	Part 342
Selling Price	$	$
Product Cost
Prime costs	$	$
Overhead	$	$
Total Product Cost	$	$
Total Profit	$	$

Part 5: Recommendations Materials have been sourced that will reduce Prime Costs by $1.50 for each part. It is also decide to reduce the price for Product 271 by 25%.
	Per unit	Part 271	Part 342
	Selling Price	$	$
	Product Cost
	Prime costs	$	$
	Overhead	$	$
	Total Product Cost	$	$
	Total Profit	$	$