chapter 4 question 3
Marine, Inc. , manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years, the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model , the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $512,000 in overhead costs would be incurred and the company would produce and sell 1000 units of the flexible model and 14,000 units of the regular model. The flexible model requires 2.0 hours of direct labor time per unit, and the regular model requires 100 hours. Direct materials and labor costs per unit are given below: Direct materials cott per unit Direct labor cost per unit Flexible $115 $55 Rigid $ 70 $ 40 Required: 1-a. Compute the predetermined overhead rate using direct labor hours as the basis for allocating overhead costs to products, 1-6 Compute the unit product cost for one unit of each model 2. An intem suggested that the company use activity based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests number of requests Product testing (number of tests) Machine related machine-hours) Estimated Overhead Cost $ 30,000 20,000 150,000 312,000 $ 512,000 Expected Activity Flexible Rigid Total 145 455 600 65 335 400 590 910 1,500 1.200 2,700 3,960 Expected Activity Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests number of requests) Product testing number of tests) Machine related machine-hours) Estimated Overhead Cost $ 30,000 20,000 150,000 312,000 $ 512,000 Flexible 145 65 590 1,200 Rigid 455 335 910 2,700 Total 680 400 1,500 3,900 Compute the activity rate for each of the activity cost pools. 3-a. Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year 3-6. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Reg 1A Reg 18 Reg 2 Reg 3A Reg 3B Compute the predetermined overhead rate using direct labor hours as the basis for allocating overhead costs to products Predotermined overhead tate $ 32 per DLH CROQ Reg 1B > Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Red 3A Reg 3B Compute the unit product cost for one unit of each model. Flexible Rigid Unit Product Cost $ 234 $ 142 Complete this question by entering your answers in the tabs below. Reg 2 Reg 1A Req 18 Req 3A Reg 3B Reg 2 Compute the activity rate for each of the writy cost pools. Activity Cost Pool Purchase orders Rework requests Product testing Machine-related Activity Rate 32 per order per request per test per MH ( Req 1B Req3A > Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Reg 2 Req Req 3B Using activity-based costing, determine the total amount of overhead that would be assigned to each Total Amount of Overhead Flexible Rigid Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req eg Using activity-based costing, compute the unit product cost for one unit of each model. (Do not round Interme calculations and round your answers to 2 decimal places.) Unit Product Cost Flexible Rigid
