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EMD Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter

EMD Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring 2 hours of direct labor time per unit to manufacture compared to 1 hour of direct labor time for Product S. Product W is produced on an automated production line.

Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $1,332,986 in manufacturing overhead costs and produce 18,300 units of Product W and 73,200 units of Product S during the current year. Unit cost for materials and direct labor are:

Product S Product W
Direct material $ 17 $ 25
Direct labor 10 19

Required:

a-1. Compute the predetermined overhead rate under the current method of allocation.

a-2. Determine the unit product cost of each product for the current year.

b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below:

Total Activity
Activity Cost Pool Total Cost Product S Product W Total
Machine setups required $ 766,120 1,740 2,540 4,280
Purchase orders issued 60,320 562 192 754
Machine-hours required 236,340 7,190 10,990 18,180
Maintenance requests issued 270,206 746 872 1,618
$ 1,332,986

Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

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