Question 2

Tuggs Corporation manufactures two products, Racket, and Table. Table, having been developed as an attempt to enter a market closely related to that of Racket, has been recently created. Of the two products, Table is the more complex one, thus requiring two and a half hours of direct labour time per unit to manufacture, compared to one hour of direct labour time for Racket. The table is produced on an automated production line. On the basis of direct labour hours, Overhead is currently assigned to the products. The company estimated it would incur $364,000 in manufacturing overhead costs and produce 4,900 units of Table and 22,100 units of Racket during the current year. Unit costs for materials and direct labour are as follows:

	Racket	Table
Direct materials	$9	$20
Direct labour	$7	$15

Submission Instructions:

1. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year.

2. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below:

		Expected Activity
Activity Cost Pool	Estimated Overhead Cost	Racket	Table	Total
Machine setups required	$161,000	800	700	1,500
Purchase orders issued Machine hours required	$32,000 $81,000	200 3,900	150 7,000	350 10,900
Maintenance requests issued	$90,000	310	510	820
Total	$364,000

Determine the unit product cost of each product for the current year using the data above and an activity-based costing approach.