Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced Direct labor cost (@ $31 per DLH) Direct materials cost Product A 12,500 units 0.13 DLH per unit $ 2.00 per unit Product B 1,100 units 0.22 DLH per unit $ 2.50 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $ 33,532 62,000 83,700 $ 179,232 Required: 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. Overhead costs Direct labor hours Overhead Assigned Product A Product B $ 179,232 $ 96.00 per direct labor hour 1,867 Activity Plantwide OH Total Overhead Driver rate Cost 1,625 $ 96.00 $ 156,000 242 $ 96.00 $ 23,232 Units Produced 12,500 1,100 OH Cost per unit $ 12.48 21.12 $ Total manufacturing cost per unit: Direct material cost per unit Direct labor cost per unit Overhead cost per unit Total manufacturing cost Product A 2.00 4.03 12.48 18.51 Product B 2.50 6.82 21.12 30.44 $ 2. If the market price for Product A is $23.63 and the market price for Product B is $60, determine the profit or loss per unit for each product. Product A Product B Market price 23.63 60.00 Manufacturing cost per unit (18.51) (30.44) Profit(loss) per unit $ 5.12$ 29.56 3. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B? Product A Product B Number of setups required for production 5 setups 36 setups Number of parts required 14 part/unit part/unit Inspection hours required 50 hours 220 hours 5 33.532 817.85 per setup 41 Machine setup Overhead costs Number of setups Materials handling Overhead costs Number of parts Quality control Overhead costs Inspection hours $ 0.23 per part 62.000 265,000 310.00 per inspection hour 83.700 270 Activity Driver Activity Rate Total Overhead Cost per unit 5 units 175,000 parts 50 setups 817.85 0.23 per part 310.00 per setup 4,089 40,250 $ X 15,500 $ 59,839 12,500 4.78 $ Overhead Assigned Product A Machine setup Materials handling Quality control Total overhead costs assigned Total units produced Overhead cost per unit Product B Machine setup Materials handling Quality control Total overhead costs assigned Total units produced Overhead cost per unit Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit $ per unit $ 36 5,500 220 units parts setups $ $ 817.85 0.23 310.00 per part per setup 29,443 1,265 68,200 98,908 1,100 89.91 $ $ $ Product A 2.00 4.03 Product B 2.50 6.82 89.91 99.23 4.78 10.81 $ 4. Determine the profit or loss per unit for each product assuming ABC costing. Product A Market price $ 23.63 Manufacturing cost per unit (10.81) Profit(loss) per unit 12.82 $ Product B 60.00 (99.23) (39.23) $ 1.2 Based on your results in part 4, should the profit or loss per unit for each product influence company strategy? No Yes
