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Ellix Company manufactures two models of ultra-high fidelity speakersthe X200 model and the X99 model. Data regarding the two products follow: Product Direct Labor-Hours Annual
Ellix Company manufactures two models of ultra-high fidelity speakersthe X200 model and the X99 model. Data regarding the two products follow:
Product | Direct Labor-Hours | Annual Production | Total Direct Labor-Hours | |||
---|---|---|---|---|---|---|
X200 | 0.4 | DLHs per unit | 21,000 | units | 8,400 | DLHs |
X99 | 0.6 | DLH per unit | 45,000 | units | 27,000 | DLHs |
35,400 | DLHs |
Additional information about the company follows:
- Model X200 requires $31 in direct materials per unit, and model X99 requires $30.
- The direct labor workers are paid $30 per hour.
- The company has always used direct labor-hours as the allocation base for applying manufacturing overhead cost to products.
- Model X200 is more complex to manufacture than model X99 and requires special equipment.
- Because of the special work required in (d) above, the company is considering an activity-based absorption costing that applies manufacturing overhead cost to products using three activity cost pools:
Activity Cost Pool | Activity Measure | Estimated Total Cost | Estimated Total Activity | ||
---|---|---|---|---|---|
X200 | X99 | Total | |||
Machine setups | Number of setups | $ 172,500 | 92 | 138 | 230 |
Special processing | Machine-hours | 403,300 | 1,090 | 0 | 1,090 |
General factory | Direct labor-hours | 1,062,000 | 8,400 | 27,000 | 35,400 |
$ 1,637,800 |
Required:
- Assume the company continues applying overhead costs to products using direct labor-hours.
- Compute the plantwide predetermined overhead rate.
- Compute each model's unit product cost.
- Assume the company decides to apply overhead cost to products using activity-based absorption costing.
- Compute the activity rate for each activity cost pool and determine the amount of overhead cost applied to each model.
- Compute each model's unit product cost.
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