Question
Problem 2. Product costing decision (25 points) PVT Inc. makes multiple models of stackable filing cabinets. In November 2020, the company expected to incur the
Problem 2. Product costing decision (25 points) PVT Inc. makes multiple models of stackable filing cabinets. In November 2020, the company expected to incur the following costs: Direct materials $ 800,000 Direct labor (5,000 hours) 120,000 Fixed manufacturing overhead 274,000 Variable manufacturing overhead 226,000 Fixed selling and administrative overhead 128,000 Variable selling and administrative overhead 172,000 Total costs for November $1,720,000 During November, the company started and completed a batch of 800 cabinets (units) for a customer in California. This batch required $16,000 of materials and 400 hours of direct labor, costing $12,000. It currently uses an overhead allocation system based on actual direct labor hours to determine the standard cost of its products. 4 a. What is the company-wide overhead allocation rate or burden rate (i.e., the amount of relevant overhead cost per direct labor hour) used by the company in November? b. What is the total amount of relevant overhead to be allocated to the 800 cabinets completed for the customer in California in November? c. What is the standard cost per unit for the cabinets completed for the customer in California? d. The company determines the selling price of its cabinets by applying a 20% markup to standard product cost. What would be the selling price per unit for the cabinets made for the customer in California? e. How would the standard cost per unit computed in c. be different if the fixed selling and administrative overhead were $165,000 instead of $128,000? 5 f. In November, the company decided to implement activity-based costing for a subsidiary making specialty cabinets with customized security features. It identified three activity cost pools. Information on these activity cost pools is as follows:
Activity Cost Pool Activity Cost Driver Activity Amount Cutting and assembling Number of units 2,000 units Processing orders Number of orders 500 orders Supporting customers Number of customers 100 customers The subsidiary's manufacturing overhead and selling & administrative overhead totaled $240,000 and $200,000, respectively. The activity pool assignments of these overhead costs are as follows. Cutting and assembling Processing orders Supporting customers Not assigned Total Manufacturing overhead 50% 35% 5% 10% 100% Selling & administrative overhead 10% 45% 25% 20% 100% Total activity amount 2,000 units 500 orders 100 customers NA NA A batch of 100 units of model #8964 cabinets was produced. It incurred $5,000 of direct material and 300 hours of direct labor at $30 per hour. There were 5 orders from 3 customer for these 100 cabinets. Determine the standard unit cost for these cabinets under activity-based costing
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