Racquet Company

Racquet type: Ace Sureshot

Units produced and sold 10,000 4,000

Selling price $220 $175

Cost/unit $20/unit

Direct labour-hour 0.5hr /racquet

Labour hour cost $10/hr

Allocation: $10 MOH/ $1 direct labout

Estimated Manufacturing overhead $700,000

MOH based on direct labour dollars

Data:

Activity Generating

Overhead Component Amount the Overhead

Machine amortization 220,000 Machine-hours (MH)

Indirect materials 50,000 Direct material cost (DM)

Indirect labour 80,000 Direct labour-hours (DLH)

Maintenance 150,000 Machine-hours (MH)

Cleaning 100,000 Square footage occupied (Sq.ft)

Factory insurance 25,000 Square footage occupied (Sq.ft)

Heat, light and power 75,000 Machine-hours (MH)

Total monthly overhead $ 700,000

Total Amount Resources Used Resources Used

Overhead Component of Activity by Ace by Sureshot

Machine amortization 22,000 MH 2 MH per unit 1/2 MH per unit

Indirect materials $280,000 DM $20 DM per unit $20 DM per unit

Indirect labour 7,000 DLH 1/2 DLH per unit DLH per unit

Maintenance 22,000 MH 2 MH per unit MH per unit

Cleaning 10,000 Sq.ft 7,500 Sq.ft 2,500 Sq.ft.

Factory insurance 10,000 Sq.ft 7,500 Sq.ft 2,500 Sq.ft.

Heat, light, and power 22,000 MH 2 MH per unit MH per unit

Q's How to compose income statement using the traditional and activity based costing systems?