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Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for
Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $2,138,400 and 42,400 hours, respectively. Information about the company's products follows. Regular- Estimated production volume: 2,200 units Direct materials cost: $36 per unit Direct labor per unit: 4 hours at $23 per hour Deluxe- Estimated production volume: 5,600 units Direct materials cost: $50 per unit Direct labor per unit: 6 hours at $23 per hour Fairchild's overhead of $2,138,400 can be identified with three major activities: order processing ($254,000), machine processing ($1,580,800), and product inspection ($303,600). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Required: A. Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system. B. Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained. (Round your intermediate calculations and final answers to 2 decimal places.) C. How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted? (Round your intermediate calculations and final answers to 2 decimal places.)
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