Question 4 Pitney Corporation manufactures two types of transpondersno 156 and no 157and applies manufacturing overhead to all units at the rate of $76 50 per machine hour Production information follows No 156 No 157 Anticipated volume (units) 6,000 14,000 Direct material cost $40 $65 Direct labor cost 25 25 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 60 40 100 Machine hours worked 15,000 25,000 40,000 Outgoing shipments 120 80 200 The firm's total overhead of $3,060,000 is subdivided as follows manufacturing setups, $260,000 machine processing, $2,400,000 and product shipping, $400,000 Required A Compute the application rates that would be used for manufacturing setups, machine processing, and product shipping in an activity based costing system B Assuming use of activity based costing, compute the unit overhead costs of product nos 156 and 157 if the expected manufacturing volume is attained C Assuming use of activity based costing, compute the total cost per unit of product no 156 D 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 Show computations

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 28, 2024

Question 4 Pitney Corporation manufactures two types of transpondersno. 156 and no. 157and applies manufacturing overhead to all units at the rate of $76.50 per

Question 4

Pitney Corporation manufactures two types of transpondersno. 156 and no. 157and applies

manufacturing overhead to all units at the rate of $76.50 per machine hour.Production information

follows.

No. 156

No. 157

Anticipated volume (units)

6,000

14,000

Direct material cost

$40

$65

Direct labor cost

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

100

Machine hours worked

15,000

25,000

40,000

Outgoing shipments

120

200

The firm's total overhead of $3,060,000 is subdivided as follows: manufacturing setups, $260,000; machine processing, $2,400,000; and product shipping, $400,000.

Required:

A.Compute the application rates that would be used for manufacturing setups, machine processing, and product shipping in an activity-based costing system.

B.Assuming use of activity-based costing, compute the unit overhead costs of product nos. 156 and 157 if the expected manufacturing volume is attained.

C.Assuming use of activity-based costing, compute the total cost per unit of product no. 156.

D.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?Show computations.