is this right so far and how do you get 3 b thanks.

EXAMPLE - Shifting of Overhead Costs - Weston Corporation manufactures a product that is available in both a deluxe and a regular model. The company has made the regular model for years, the deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company's profits have steadily declined. Sales of the deluxe model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $3,080,000 in overhead costs would be incurred and the company would produce and sell 10,000 units of the deluxe model and 50,000 units of the regular model. The deluxe model requires 2.0 hours of direct labor time per unit, and the regular model requires 1.0 hours. Materials and labor costs per unit are given below: Deluxe Direct materials cost per unit...... $50.00 Direct labor cost per unit............. $30.00 Regular $30.00 $15.00 1. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. Predetermined overhead Rate DRIOR Por unit direct Labor requirement DS # of units Produced 10,000 1,000 Total direct Latorhaus 120,000/50,000 70,000 Our Total overheads 3,080,000 Unit Cost o $3,080,000/10,000 hours = 144 KO EXAMPLE CONTINUED ON NEXT PAGE 4-6 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed below: Estimated Overhead Activity Activity Cost Pool and Activity Measure Cost Deluxe Regular Total Purchase orders (number of orders).............. S60,000 500 1.000 1.500 Rework requests (number of requests).............. 280,000 800 2,000 2,800 Product testing number of tests) 240,000 7.000 3.000 10.000 Machine-related machine-hours) 2.500.000 4.500 8.000 12.500 $3.080,000 Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools, Purchase order = 60,000/1500 = 4o per order Rework Tegunts - 280,000/2400 = 100 Por request Product testing = 240,000/10,000 = 24 per test Machine Related = 2,500,000/12,500 = 200 MA 3. Assume that actual activity is as expected for the year. Using activity-based costing, do the following: a. Determine the total amount of overhead that would be applied to each model for the year. Delox Purch 500 40 20,000 Roron 1000x40 40.000 OS 000 Rework 2,000 2100 200.000 Scout 1,000 2 169.000 Product 3,000x2972,000 Machine/4,500 x 200/900poo Mashhe 8, Gour 2001,600,000 Total 163,000 Total 11.962,000 D b. Compute the unit product cost for one unit of each model. 30 15 30 Direct Material cost perdult Direct Lubor cost for unit Overhad per unit Unit cost for 1 Unlteach Model 4. Can you identify a possible explanation for the company's declining profits? If so, what is it? 4.7