Exercise 9-38 and 9-39 (Algo)

Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow.

	V-1			V-2
Units produced		10,000			1,000
Direct materials cost per unit	$	2		$	4
Machine hours per unit		1			2
Production runs per month		80			40

Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow.

Machine depreciation	$	72,000
Setup labor		32,400
Material handling		17,280
Total	$	121,680

Required:

a. Upriver currently applies overhead on the basis of machine hours. What is the predetermined overhead rate for the month? (Round your answer to 2 decimal places.)

What is the overhead rate per machine hour?

b. Upriver is thinking of adopting an ABC system. They have tentatively chosen the following cost drivers: machine hours for machine depreciation, production runs for setup labor, and direct material dollars for material handling. Compute the cost driver rates for the proposed system at Upriver. (Round "Machine depreciation" answer to 2 decimal places.)

What is the machine depreciation per machine hour? What is the Setup labor per production run? What is the material handling % direct materials cost?

a.	Overhead Rate		per machine hour
b.	Machine Depreciation		per machine hour
	Setup Labor		per production run
	Material Handling		% direct material cost

c. Compute the unit costs for the two products V-1 and V-2 using the current costing system at Upriver (using machine hours as the allocation basis). (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Unit Cost for using current costing system for V-1?

Unit Cost for using current costing system for V-2?

d. Compute the unit costs for the two products V-1 and V-2 using the proposed ABC system at Upriver. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Unit Cost for using proposed ABC system for V-1?

Unit Cost for using proposed ABC system for V-2?

		Unit Cost	Unit Cost
		V-1	V-2
c.	Using current costing system
d.	Using proposed ABC system