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Get Well Ltd manufactures three types of hospital beds A, B and C The company has been experiencing steady declines in its profitability in recent
Get Well Ltd manufactures three types of hospital beds A, B and C The company has been experiencing steady declines in its profitability in recent times. Get Well Ltd currently uses conventional product costing system whereby overhead costs are allocated on the basis of direct labour hours. The direct labour hours are estimated to be 85,000 hours. The Direct material and Direct Labour costs per unit for the three products are as below: A B C Direct Material $450 $625 $750 Direct Labour $200 $100 $50 The management suspects that conventional product costing system used may have contributed to the profit declines. Therefore, the CFO implemented an alternative system namely, actiVity-based product costing system. Given below are each activity, its cost and its related actiVity driver. Activity Cost Activity Driver Shipping $3,250,000 Number of parts Machining $1,340,000 Machine hours Cutting $2,210,000 Labour hours Total manufacturing cost $6,800,000 The following information pertains to each product line of Get Well Ltd for the year: A B C Units to be produced 12500 5000 25,000 Parts per unit 10 15 5 Machine hours per unit 3 1 5 Labour hours per unit 4 2 1 1) Calculate the predetermined overhead rate based on Direct labour hours (0.5 mark) Please only enter number do not use comma, dollar sign or decimal point Predetermined Rate = 2) Calculate the cost per unit under conventional product costing system? (1.5 mark) Please only enter number do not use comma. dollar sign or decimal point Product A Product B Product C 3)Determine the total overhead allocated to each of the three products (4.5 marks) Please only enter number do not use comma, dollar sign or decimal point. A B C Shipping Machining Cutting 4) Determine the total cost per unit of producing each product it activity based costing were to be used (1.5 mark) Please only enter number do not use comma, dollar sign or decimal point. Product A Product B Product C
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