Ontario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours, respectively. Information about the company's products follows. Standard: Estimated production volume, 3,000 units Direct-material cost, $25 per unit Direct labor per unit, 3 hours at $12 per hour Enhanced Estimated production volume, 4,000 units Direct-material cost, $40 per unit Direct labor per unit 4 hours at $12 per hour Ontario's overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Machine Hours Worked 18,000 22,000 40.000 Orders Processed 300 200 500 Standard Enhanced Total Inspection Hours 2.000 8.000 10.000 Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed-machinery that was expected to produce significant operating efficiencies Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. htu.hased costing, compute the unit manufacturing costs of the Standard and Enhanced products if the Total 500 40,000 10,000 Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed-machinery that was expected to produce significant operating efficiencies. Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected. manufacturing volume is attained. 3. Ontario's selling prices are based heavily on cost. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3a Reg 3b Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. Standard Enhanced Manufacturing cost per unit Req2 > 10,odo Top management is very concerned about declining profitability despite a healthy Increase in sales volume. The decrease in in especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed-machinery that was expected to produce significant operating efficiencies, Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard Enhanced products if the expected manufacturing volume is attained. 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products of the expected. manufacturing volume is attained. 3. Ontario's selling prices are based heavily on cost. Complete this question by entering your answers in the tabs below. Reg 2 Req 1 Req3b Req 3a Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. Standard Enhanced Manufacturing cost per unit Total 500 40,000 10,000 Top management is very concerned about declining profitability despite a healthy Increase in sales volume. The decrease in income especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed-machinery that was expected to produce significant operating efficiencies. Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected. manufacturing volume is attained. 3. Ontario's selling prices are based heavily on cost. Complete this question by entering your answers in the tabs Req 1 Reg 2 Req 3a Req 3b which product is undercosted? Calculate By using direct-labor hours as an application base, which product is the amount of the cost distortion for each product. Standard Enhanced top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease especially puzzling because the company recently undertook a massive plant renovation during which new, highly automate machinery was installed---machinery that was expected to produce significant operating efficiencies. Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standar Enhanced products if the expected manufacturing volume is attained. 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products ift expected manufacturing volume is attained. 3. Ontario's selling prices are based heavily on cost. Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3a Reg 36 Is it possible that overcosting and undercosting (I.e., cost distortion) and the subsequent determination of selling prices are contributing to the company's profit woes? Yes
