Plantwide versus Departmental Rates, Product$-$Costing Accuracy: Activity$-$Based Costing

Ramsey Company produces speakers $($Model A and Model B$).$ Both products pass through two producing departments. Model A$\text{'}$s production is much more labor$-$intensive

than that of Model B$.$ Model B is also the more popular of the two speakers. The following data has been gathered for the two products:

Overhead costs:

$1.$ Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. $($Round to two decimal places.$)$

Plantwide rate: fill in the blank $1$ of $1$$ per DLH$.$

Model A: fill in the blank $1$ of $1$$ overhead cost per unit.

Model B: fill in the blank $1$ of $1$$ overhead cost per unit.

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$2.$ Compute the overhead cost per unit for each product by using ABC. $($Round rates and unit overhead costs to two decimal places.$)$

Model Answer

Model A: fill in the blank $1$ of $2$$ overhead cost per unit.

Model B: fill in the blank $2$ of $2$$ overhead cost per unit.

Note: Be sure to complete both tables below.

Activity Driver Activity Rate

Setups

fill in the blank $1$ of $4$$ per

Inspections

fill in the blank $2$ of $4$$ per

Machining

fill in the blank $3$ of $4$$ per

Maintenance

fill in the blank $4$ of $4$$ per

Overhead assignment

Line Item Description Model A Model B

Setups fill in the blank $1$ of $14$$ fill in the blank $2$ of $14$$

Inspections fill in the blank $3$ of $14$ fill in the blank $4$ of $14$

Machining fill in the blank $5$ of $14$ fill in the blank $6$ of $14$

Maintenance fill in the blank $7$ of $14$ fill in the blank $8$ of $14$

Total overhead fill in the blank $9$ of $14$$ fill in the blank $10$ of $14$$

$-$: Units produced fill in the blank $11$ of $14$ fill in the blank $12$ of $14$

Overhead per unit fill in the blank $13$ of $14$$ fill in the blank $14$ of $14$$

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$3.$ Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department $1$: $($machine intensive$)$ with a rate of $$3$ per machine hour and Department $2$: $($labor intensive$)$ with a rate of $$1$ per direct labor hour. The consumption of these two drivers is as follows:

Line Item Description Department $1$

Machine Hours Department $2$

Direct Labor Hours

Model A $11,000133,000$

Model B $150,000270,000$

Compute the overhead cost per unit for each product by using departmental rates. $($Round to two decimal places.$)$

Model A: fill in the blank $1$ of $2$$ per unit

Model B: fill in the blank $2$ of $2$$ per unit