Question
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
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's production is much more labour-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products:
| Product Data | |||
| Model A | Model B | ||
| Units produced per year | 20,000 | 160,000 | |
| Prime costs | $150,000 | $1,500,000 | |
| Direct labour hours | 140,000 | 300,000 | |
| Machine hours | 20,000 | 200,000 | |
| Production runs | 40 | 60 | |
| Inspection hours | 800 | 1,200 | |
| Maintenance hours | 10,000 | 90,000 | |
| Overhead costs: | |||
| Setup costs | $270,000 | ||
| Inspection costs | 210,000 | ||
| Machining | 240,000 | ||
| Maintenance | 270,000 | ||
| Total | $990,000 | ||
Required:
1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labour hours. In your calculations, round any intermediate rates to two decimal places and use in subsequent computations. Round you final answers to two decimal places.
| Model A | $per unit |
| Model B | $ per unit |
2. Using ABC costing, compute the total overhead costs for setup, inspections, machining, and maintenance for Model A and Model B. Then, compute the overhead cost per unit for Model A and Model B. For total costs, round your answers to the nearest dollar, if required. For overhead cost per unit, round to the nearest cent.
| Model A | Model B | |
| Setups (in total dollars) | $ | $ |
| Inspections | $ | $ |
| Machining | $ | $ |
| Maintenance | $ | $ |
| Overhead per unit | $ | $ |
1.. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $3.50 per machine hour and Department 2 (labour intensive) with a rate of $0.90 per direct labour hour. The consumption of these two drivers is as follows:
| Department 1 Machine Hours | Department 2 Direct Labour Hours | |||
| Model A | 10,000 | 130,000 | ||
| Model B | 170,000 | 270,000 | ||
Compute the overhead cost per unit for each product by using departmental rates. Round your answers to the nearest cent.
| Model A | $per unit |
| Model B | $per unit |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Modern Internal Auditing Appraising Operations And Controls
Authors: Victor Z. Brink, Herbert N. Witt
4th Edition
0471080977, 978-0471080978
