Deluxe Model Standard Model 19,000 1,300 Heavy-Duty Model 9,200 $ $ $ $ Annual sales (units) Product costs: Raw material Direct labor Manufacturing overhead" Total product cost 10 10 (0.5 hr. at $20) 50 70 25 20 (1hr. at $20) 100 145 50 20 (1hr. at $20) 100 170 $ $ $ 'The calculation of the predetermined overhead rate is as follows: Standard Deluxe Heavy I. 38 % 16 % 46 % II. 46 % Activity Cost Pool Cost Driver Depreciation, machinery Maintenance, machinery Machine time Engineering Inspection and repair of defects Engineering hours Purchasing, receiving, and shipping Material handling Number of material orders Depreciation, taxes, and insurance for factory Factory space usage Miscellaneous manufacturing overhead 8% 46 % Manufacturing-overhead budget: Depreciation, machinery $ Maintenance, machinery Depreciation, taxes, and insurance for factory Engineering Purchasing, receiving and shipping Inspection and repair of defects Material handling Miscellaneous manufacturing overhead costs Total $ III. 1,320,000 120,000 200,000 250,000 200,000 290,000 350,000 270,000 3,000,000 46 % 40 % 10 % 19 % 44 % 41 % IV. QUESTIONS Required: 1. Compute the target prices for the three models, based on the traditional, volume-based product-costing system. 2. Compute new product costs for the three products, based on the new data collected by the controller. 3. Calculate a new target price for the three products, based on the activity-based costing system Direot-labor budget Standard model: Deluxe model: 13,000 4,000 hours hours Stand ard Model Deluxe Model Heavy- Duty Model Heavy-duty model: Total 13,000 30,000 hours hours 1 2 3 Target price New product cost New target price Predetermined overhead rate: Budgete- $3,000,000 = $100 per hour Budgeted direct-labor 30,000 hours Deluxe Model Standard Model 19,000 1,300 Heavy-Duty Model 9,200 $ $ $ $ Annual sales (units) Product costs: Raw material Direct labor Manufacturing overhead" Total product cost 10 10 (0.5 hr. at $20) 50 70 25 20 (1hr. at $20) 100 145 50 20 (1hr. at $20) 100 170 $ $ $ 'The calculation of the predetermined overhead rate is as follows: Standard Deluxe Heavy I. 38 % 16 % 46 % II. 46 % Activity Cost Pool Cost Driver Depreciation, machinery Maintenance, machinery Machine time Engineering Inspection and repair of defects Engineering hours Purchasing, receiving, and shipping Material handling Number of material orders Depreciation, taxes, and insurance for factory Factory space usage Miscellaneous manufacturing overhead 8% 46 % Manufacturing-overhead budget: Depreciation, machinery $ Maintenance, machinery Depreciation, taxes, and insurance for factory Engineering Purchasing, receiving and shipping Inspection and repair of defects Material handling Miscellaneous manufacturing overhead costs Total $ III. 1,320,000 120,000 200,000 250,000 200,000 290,000 350,000 270,000 3,000,000 46 % 40 % 10 % 19 % 44 % 41 % IV. QUESTIONS Required: 1. Compute the target prices for the three models, based on the traditional, volume-based product-costing system. 2. Compute new product costs for the three products, based on the new data collected by the controller. 3. Calculate a new target price for the three products, based on the activity-based costing system Direot-labor budget Standard model: Deluxe model: 13,000 4,000 hours hours Stand ard Model Deluxe Model Heavy- Duty Model Heavy-duty model: Total 13,000 30,000 hours hours 1 2 3 Target price New product cost New target price Predetermined overhead rate: Budgete- $3,000,000 = $100 per hour Budgeted direct-labor 30,000 hours
