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Florida Company manufactures two products, Product A and Product B. The company estimated it would incur $160,790 in manufacturing overhead costs during the current period.
Florida Company manufactures two products, Product A and Product B. The company estimated it would incur $160,790 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period's operations appear below: + Estimated volume- Direct labor-hours per unite Direct materials cost per unit Direct labor cost per unit Product A 3,400 units 1.40hour- $ 7.40 $ 14.00 Product B2 4,800 units 1.90hourse $ 12.70 $ 19.00 Required: a. Compute the predetermined overhead rate under the current method and determine the unit product cost of product A for the current year (ie the total of direct materials, direct labor and overhead per unit). b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:- + Activity Cost Pool Machine setups- Purchase orders General Factory (square feet) Estimated Overhead Costs $ 12,190 79,200 69,400 Expected Activity Product Product A B Total 80 150 230 + 7309201,650 + 4,760 9,120 13,880* $ 160,790 Determine the unit product cost of product A for the current period using the activity-based costing approach (ie the total of direct materials, direct labor and overhead per unit). c At the end of the year, records show that 14,000 hours of direct labor were used and actual overhead costs were $ 160,500. What is the over- or under-applied overhead for the year? Be sure to indicate whether it is over or under applied
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