Question
Private Corporation manufactures two types of transpondersno. 156 and no. 157and applies manufacturing overhead to all units at the rate of $78.00 per machine hour.
Private Corporation manufactures two types of transpondersno. 156 and no. 157and applies manufacturing overhead to all units at the rate of $78.00 per machine hour. Production information follows.
No. 156 | No. 157 | ||||||||||
Anticipated volume (units) | 6,600 | 15,500 | |||||||||
Direct material cost | $ | 43 | $ | 68 | |||||||
Direct labor cost | 40 | 28 | |||||||||
The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours worked, and outgoing shipments, the activities' three respective cost drivers, follow.
No. 156 | No. 157 | Total | |||||||||
Setups | 63 | 43 | 106 | ||||||||
Machine hours worked | 15,300 | 26,500 | 41,800 | ||||||||
Outgoing shipments | 123 | 83 | 206 | ||||||||
The firm's total overhead of $3,260,400 is subdivided as follows: manufacturing setups, $263,000; machine processing, $2,557,800; and product shipping, $439,600.
Required:
- Compute the pool rates that would be used for manufacturing setups, machine processing, and product shipping in an activity-based costing system.
- Assuming use of activity-based costing, compute the unit overhead costs of product nos. 156 and 157 if the expected manufacturing volume is attained.
- Assuming use of activity-based costing, compute the total cost per unit of product no. 156.
- If the company's selling price is based heavily on cost, would a switch to activity-based costing from the current traditional system result in a price increase or decrease for product no. 156?
per SU per MH per OS A. Manufacturing setups Machine processing Product shipping B. Overhead costs of product: No. 156 No. 157 Cost per unit of product no. 156 D. Product no. 156
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