Question
Ellix Company manufactures two models of ultra-high fidelity speakers, the X200 model and the X99 model. Data regarding the two products follow: Product Direct Labor-Hours
Ellix Company manufactures two models of ultra-high fidelity speakers, the X200 model and the X99 model. Data regarding the two products follow: |
Product | Direct Labor-Hours | Annual Production | Total Direct Labor-Hours |
X200 | 0.2 DLH per unit | 16,000 units | 3,200 DLHs |
X99 | 0.4 DLH per unit | 36,000 units | 14,400 DLHs |
17,600 DLHs | |||
Additional information about the company follows: | |
a. | Model X200 requires $33 in direct materials per unit, and model X99 requires $32. |
b. | The direct labor rate is $40 per hour. |
c. | The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. |
d. | Model X200 is more complex to manufacture than model X99 and requires the use of special equipment. |
e. | Because of the special work required in (d) above, the company is considering the use of activity-based absorption costing to apply manufacturing overhead cost to products. Three activity cost pools have been identified as follows: |
Estimated Total Activity | ||||||
Activity Cost Pool | Activity Measure | Estimated Total Cost | X200 | X99 | Total | |
Machine setups | Number of setups | $ | 187,200 | 96 | 144 | 240 |
Special processing | Machine-hours | 417,300 | 1,070 | 0 | 1,070 | |
General factory | Direct labor-hours | 704,000 | 3,200 | 14,400 | 17,600 | |
$ | 1,308,500 | |||||
Required: | |
1. | Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. |
a. | Compute the predetermined overhead rate. (Round "pre-determined overhead rate" to nearest dollar.) |
b. | Compute the unit product cost of each model. (Round "pre-determined overhead rate" to nearest dollar and round other intermediate calculations and final answers to 2 decimal places.) |
2. | Assume that the company decides to use activity-based absorption costing to apply overhead cost to products. |
a. | Compute the activity rate for each activity cost pool and determine the amount of overhead cost that would be applied to each model using the activity-based approach. (Round "Overhead cost per unit" answers to 2 decimal places.) |
b. | Compute the unit product cost of each model. (Round intermediate calculations and final answers to 2 decimal places.) |
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