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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:

  1. Model X200 requires $31 in direct materials per unit, and model X99 requires $30.
  2. The direct labor workers are paid $30 per hour.
  3. The company has always used direct labor-hours as the allocation base for applying manufacturing overhead cost to products.
  4. Model X200 is more complex to manufacture than model X99 and requires special equipment.
  5. 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:

  1. Assume the company continues applying overhead costs to products using direct labor-hours.
    1. Compute the plantwide predetermined overhead rate.
    2. Compute each model's unit product cost.
  2. Assume the company decides to apply overhead cost to products using activity-based absorption costing.
    1. Compute the activity rate for each activity cost pool and determine the amount of overhead cost applied to each model.
    2. Compute each model's unit product cost.

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