Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning
Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $920,520 is based on 43,500 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Cost Pool Product assembly Machine setup and calibration Product inspection Raw materials storage Expected Cost Expected Activities $ 387,150 43,500 Machine hours 320,950 2,450 setups 126,380 1,420 batches 86,040 478,000 pounds $ 920,520 Eric Parker is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Component 3F5 1,000 Component T76 10,000 Driver Usage Machine hours Setups Batches Pounds of raw materials 40 21 15 15 10.000 10,000 Eric Parker found that the budget included production of 540 units of Component 3F5 and 5,400 units of Component 176. (a) Calculate the overhead cost per unit of Component 3F5 and Component 176 under traditional costing using machine hours as the overhead application base. (Round overhead rates to 2 decimal places, e.g. 5.27 and round final answers to 2 decimal places, e.g. 52.75.) Component 3F5 Component 176 $ $ Overhead cost per unit (b) Calculate the overhead cost per unit of Component 3F5 and Component T76 underactivity-based costing. (Round overhead rates to 2 decimal places, e.g. 5.27 and round final answers to 2 decimal places, e.g. 52.75.) Component 3F5 Component 176 $ $ Overhead per unit
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started