Question
Precision Manufacturing Inc. (PMI) makes two types of industrial component partsthe EX300 and the TX500. It annually produces 56,000 units of EX300 and 12,100 units
Precision Manufacturing Inc. (PMI) makes two types of industrial component partsthe EX300 and the TX500. It annually produces 56,000 units of EX300 and 12,100 units of TX500. The companys 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 companys two product lines is shown below: EX300 TX500 Total Direct materials $ 362,325 $ 158,550 $ 520,875 Direct labor $ 116,000 $ 40,500 $ 156,500 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) Manufacturing Overhead Activity EX300 TX500 Total Machining (machine-hours) $ 219,750 86,000 60,500 146,500 Setups (setup hours) 113,400 55 260 315 Product-level (number of products) 54,970 1 1 2 General factory (direct labor dollars) 50,080 $ 116,000 $ 40,500 $ 156,500 Total manufacturing overhead cost $ 438,200
Required: 1-a. Compute the plantwide overhead rate that would be used in the companys conventional cost system
1-b. Using the plantwide rate, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
2-a. Compute the activity rate for each activity cost pool. (Round your Machining and General factory activity rates to 2 decimal places.)
2-b. Using the activity rates, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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