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Old MathJax webview Need help with requirement 2b Precision Manufacturing Incorporated (PMI) makes two types of industrial component parts- the EX300 and the TX500. It
Old MathJax webview
Need help with requirement 2b
Precision Manufacturing Incorporated (PMI) makes two types of industrial component parts- the EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor EX300 $ 366,325 $ 120,000 TX500 $ 162,550 $ 42,500 Total $ 528,875 $ 162,500 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Total manufacturing overhead cost Manufacturing Overhead $ 198,250 150,000 100, 250 60, 125 $ 508,625 EX300 90,000 75 1 $ 120,000 Activity TX500 62,500 300 1 $ 42,500 Total 152,500 375 2 $ 162,500 NU Direct materials Direct labor $ 366,325 $ 120,000 $ 162,550 $ 42,500 $ 528,875 $ 162,500 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Total manufacturing overhead cost Manufacturing Overhead $ 198,250 150,000 100, 250 60,125 $ 508,625 EX300 90,000 75 1 $ 120,000 Activity TX500 62,500 300 1 $ 42,500 Total 152,500 375 2 $ 162,500 Required: 1-a. Compute the plantwide overhead rate that would be used in the company's conventional cost system. 1-b. Using the plantwide rate, compute the unit product cost for each product. 2-a. Compute the activity rate for each activity cost pool. 2-b. Using the activity rates, compute the unit product cost for each productStep by Step Solution
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