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Question 1 (Mandatory) (20 points)

Question 1 options:

Entry Rules:

Round your answer totwo (2) decimal places.

Examples:

If your answer is $24,500.4718, enter 24500.47

If your answer is $24,500.4753, enter 24500.48

If your answer is $24,500.00, enter 24500.00

If your answer is $0.4718, enter 0.47

If your answer is ZERO, enter 0.00

Never enter $ or , when inputting numerical answers

QUESTION:

Hallway Inc. manufactures a variety of patio chairs. The costing system was designed using an activity-based costing system. The following budgeted information is available at the beginning of the year:

	Product A	Product B
Quantity	100,000	800,000
Selling price	$900.00	$750.00
Units prime cost	$529.00	$483.00

In addition, the following information was provided so that overhead costs could be assigned to each product:

Activity Name	Activity Driver	Budgeted Activity Cost	Product A Annual Activity	Product B Annual Activity
Setups	Number of set ups	$2,000,000	300	200
Machining	Machine hours	$80,000,000	100,000	300,000
Engineering	Engineering hours	$6,000,000	50,000	100,000
Packing	Packing orders	$1,000,000	100,000	400,000

Use the above information to answer the following questions.

What is the activity-based overhead rate for Setups?

HINT: remember to apply the entry rules.

What is the activity-based overhead rate for Machining?

HINT: remember to apply the entry rules.

What is the activity-based overhead rate for Engineering?

HINT: remember to apply the entry rules.

What is the activity-based overhead rate for Packing?

HINT: remember to apply the entry rules.

Using the activity rates you have calculated, calculate the total overhead that would be allocated to all the units of Product A.

Remember the entry rules and follow them! (Often, when students are marked wrong, it is because they are not following the rules!)

Using the activity rates you have calculated, calculate the total overhead that would be allocated to all the units of Product B.

Remember the entry rules and follow them!

Using the total overhead allocated to Product A, calculate the overhead allocated to each unit of Product A.

HINT: Using the total overhead allocated to Product A, divide that by the number of units for Product A.

Using the total overhead allocated to Product B, calculate the overhead allocated to each unit of Product B.

HINT: Using the total overhead allocated to Product B, divide that by the number of units for Product B.

Calculate the total cost per unit for Product A, given the overhead per unit you just calculated. Then, using the Selling Price per unit for Product A, calculate the operating income per unit for Product A.

The operating income per unit of Product A is $__________.

Calculate the total cost per unit for Product B, given the overhead per unit you just calculated. Then, using the Selling Price per unit for Product B, calculate the operating income per unit for Product A.

The operating income per unit of Product B is $__________.

View hint for Question 1

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