Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Globe steel Furniture Ltd (GSFL) manufactures three types of steel tables Deluxe, Prince and King. The company has been experiencing steady declines in its profitability

image text in transcribed
image text in transcribed
image text in transcribed
Globe steel Furniture Ltd (GSFL) manufactures three types of steel tables Deluxe, Prince and King. The company has been experiencing steady declines in its profitability in recent times. GSFL 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 146,000 hours. The Direct material and Direct Labour costs per unit for the three products are as below: Deluxe Prince King Direct Material $360 $500 $600 Direct Labour $90 $120 $150 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 Cost Activity Material handling Activity Driver Weight of raw material $ 96,000 Machining Assembly Total manufacturing cost Machine hours 1,072,000 $292,000. Direct Labour hours $ 1,460,000 The following information pertains to each product line of GSFL Ltd for the year: Deluxe Prince King Units to be produced 10,000 4,000 20,000 Machine hours per unit 6 2 10 Weight (kg)of raw material per 1 3 0.5 unit Labour hours per unit 3 4 5 1) Calculate the predetermined overhead rate based on Direct labour hours (0.5 mark) Please only enter number do not use 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 dollar sign or decimal point Deluxe Prince King 3)Determine the total overhead allocated to each of the three products (4.5 marks) Please only enter number do not use dollar sign or decimal point. Deluxe Prince King Material handling Machining Assembly 4) Determine the total cost per unit of producing each product if activity based costing were to be used (1.5 mark) Please only enter number do not use dollar sign where applicable, use one decimal point. Deluxe Prince King

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Decision Modeling With Spreadsheets

Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair

3rd Edition

136115837, 978-0136115830

Students also viewed these Accounting questions