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Precision Manufacturing Incorporated (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 64,000 units of EX300 and 12,900
Precision Manufacturing Incorporated (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 64,000 units of EX300 and 12,900 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 $370,325 $ 124,000 TX500 Total $ 536,875 $ 166,550 $ 44,500) $ 168,500 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) Manufacturing Overhead $ 237,750 Setups (setup hours) Product-level (number of products) General factory (direct labor dollars). 191,400 89,830 70,770 EX300 94,000 95 Activity TX500 64,500 340 1 1 Total 158,500 435 2 $124,000 $ 44,500 $ 168,500 Total manufacturing overhead cost $ 589,750 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 product.
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