Product-Costing Accuracy, Plantwide and Departmental Rates, ABC

Escuha Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products:

	Product-Related Data
	Scientific	Business
Units produced per year	75,000	750,000
Prime costs	$262,000	$2,620,000
Direct labor hours	100,200	1,002,000
Machine hours	50,500	505,000
Production runs	100	150
Inspection hours	2,000	3,000
Maintenance hours	2,250	9,000

	Department Data
	Department 1	Department 2
Direct labor hours:
Scientific calculator	75,300	24,900
Business calculator	130,260	871,740
Total	205,560	896,640
Machine hours:
Scientific calculator	26,700	23,800
Business calculator	405,840	99,160
Total	432,540	122,960
Overhead costs:
Setup costs	$218,000	$218,000
Inspection costs	195,000	195,000
Power	258,000	142,000
Maintenance	200,000	272,500
Total	$871,000	$827,500

Required:

1. Compute the overhead cost per unit for each product using a plantwide, unit-based rate using direct labor hours. Round your calculations and answers to the nearest cent.

Plantwide rate	$fill in the blank 1 per direct labor hour
Overhead cost per unit:
Scientific	$fill in the blank 2 per unit
Business	$fill in the blank 3 per unit

2. Compute the overhead cost per unit for each product using departmental rates. In calculating departmental rates, use machine hours for Department 1 and direct labor hours for Department 2. Round departmental rates and the overhead cost per unit to the nearest cent if rounding is required.

Departmental rates:
Department 1	$fill in the blank 4 per machine hour
Department 2	$fill in the blank 5 per direct labor hour
Overhead cost per unit:
Scientific	$fill in the blank 6 per unit
Business	$fill in the blank 7 per unit

Repeat using direct labor hours for Department 1 and machine hours for Department 2. Round departmental rates and the overhead cost per unit to the nearest cent if rounding is required.

Departmental rates:
Department 1	$fill in the blank 8 per direct labor hour
Department 2	$fill in the blank 9 per machine hour
Overhead cost per unit:
Scientific	$fill in the blank 10 per unit
Business	$fill in the blank 11 per unit

3. Compute the overhead cost per unit for each product using activity-based costing. Round your calculations and answers to the nearest cent.

	Overhead Cost
Scientific	$fill in the blank 12 per unit
Business	$fill in the blank 13 per unit

Feedback Area

Feedback

1. Plantwide OH rate is determined by taking the whole expected annual OH driver (in this case, the total direct labor hours). Apply Overhead to each Product and calculate Unit cost.

2. For each activity: Expected cost activity capacity for driver = OH for each activity. Apply OH rate to individual activity for each Product. Then repeat following instructions.

3. Predetermined OH rate = Budgeted annual overhead Budgeted annual driver level. Applied OH = Overhead rate x Actual driver usage. Unit Cost = (Prime cost + OH Cost) Total Units