Problem 4-17 Contrast Activity-Based Costing and Conventional Product Costing [LO4-2, LO4-3, LO4-4]

[The following information applies to the questions displayed below.]

Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

	Direct Labor- Hours per Unit	Annual Production	Total Direct Labor-Hours
Model N 800 XL	3.5	4,500 units	15,750
Model N 500	1.2	12,500 units	15,000
			30,750

Additional information about the company follows:

a. Model N 800 XL requires $60 in direct materials per unit, and Model N 500 requires $15.

b. The direct labor wage rate is $19 per hour.

c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.

d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Machine setups	Number of setups	$	420,000
Special processing	Machine-hours		195,000
General factory	Direct labor-hours		1,230,000
		$	1,845,000

	Expected Activity
Activity Measure	Model N 800 XL	Model N 500	Total
Number of setups	120	300	420
Machine-hours	15,000	0	15,000
Direct labor-hours	15,750	15,000	30,750

Problem 4-17 Part 1

Required:

1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.

a. Compute the predetermined overhead rate.

b. Compute the unit product cost of each model.

Complete this question by entering your answers in the tabs below.

• Req 1A

Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

Predetermined overhead rate

per DLH

Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. Compute the unit product cost of each model. (Round your answers to 2 decimal places.)

Model N 800 XL
Model N 500

Problem 4-17 Part 2

2. Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products.

a(1). Compute the activity rate for each activity cost pool.

a(2). Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system.

b. Compute the unit product cost of each model.

• Req 2A1

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Machine setup		per setup
Special processing		per MH
General factory		per DLH

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products. Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

	Model N 800 XL	Model N 500
Overhead cost per unit

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products. Compute the unit product cost of each model. (Round your intermediate calculations and final answers to 2 decimal places.)

	Model N 800 XL	Model N 500
Unit product cost