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Duration-Based Costing Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC
Duration-Based Costing Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC system to assign costs to the two products. For the coming year, the company has the following overhead activities, costs, and activity drivers: Activity Activity Driver Setups Setup hours Expected Cost $214,612 $420,000 $112,500 Activity Capacity 10,000 20,000 5,000 Machining Machine hours Moving Move hours Total OH $747,112 At practical capacity, the expected activity demands for each product are as follows: Regular High Performance Performance Model Model Units completed Setup hours 30,000 8,000 6,000 8,000 2,000 14,000 4,000 Machine hours Moving hours 1,000 The production cycle time for the regular performance camshaft is 0.50 (hours per unit) and that of the high performance camshaft is 2.5 (hours per unit). Required: 1. Calculate the consumption ratios for each activity. Use these consumption ratios to assign the total overhead to each camshaft model and then calculate the overhead cost per unit for each model (round unit cost to two decimal places). Setups Machining Moving Reg. Perf. Model 0.8 0.3 0.2 High Perf. Model 0.2 0.7 0.8 Unit overhead cost: 10.67 Reg. Perf. Model High Perf. Model 53.37 2. Calculate the total and per unit overhead assigned to each model using DBC (assume you only know cycle time, total overhead costs, and units at practical capacity). Round the overhead rate to four decimal places. Total overhead rate $ 21.35 Total overhead
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