Question
Hi-Def Video Company makes two types of digital DVD players, economy and deluxe, with the following per unit cost information: Direct materials Direct labor
Hi-Def Video Company makes two types of digital DVD players, economy and deluxe, with the following per unit cost information: Direct materials Direct labor Manufacturing overhead Full manufacturing cost per unit Economy (18,000 units) Deluxe (12,000 units) $115 $138 32 32 ? ? ? ? The company currently applies $5,400,000 in manufacturing overhead to the two products on the basis of direct labor hours. Each product unit requires 3 hours of direct labor. a. What rate is currently used to apply manufacturing overhead to the two products? b. Using the rate calculated in question (a), what is the full manufacturing cost per unit of the Economy and Deluxe product? Assume that High-Def has decided to implement an ABC system and has assigned the $5,400,000 in manufacturing overhead to 4 activities, which will be assigned to the two products based on the following activity drivers: Activity Driver for each product line Activity Pools Activity Cost Activity Driver Economy Deluxe Materials handling $1,200,000 No. of parts 40,000 60,000 Quality control 1,650,000 No. of inspections 15,000 25,000 Finishing 870,000 No. of direct labor hours 20,000 10,000 Packaging Total 1,680,000 $5,400,000 No. of packages shipped 15,000 10,000 c. What are the activity rates for each activity pool (Materials handling. Quality control, Finishing and Packaging)? d. What is the full manufacturing cost per unit of the Deluxe model under ABC system? e. If a unit of Deluxe product is sold for $525, what is the gross profit margin?
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