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Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor- intensive than
Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor- intensive than that of Model B. Model B is also the more popular of the two speakers. The following data has been gathered for the two products: Product Data Model A Model B Units produced per year 10,000 100,000 Prime costs $153,000 $1,530,000 Direct labor hours 145,000 320,000 Machine hours 19,000 204,000 Production runs 40 60 Inspection hours 700 1,400 Maintenance hours 8,000 92,000 Overhead costs: Setup costs $290,000 Inspection costs 220,500 Machining 335,500 Maintenance 270,000 Total $1,116,000 Required: 1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours (Round to two decimal places) 2. Compute the overhead cost per unit for each product by using ABC (Round rates and unit overhead cost to two decimal places) 3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments Department 1 (machine intensive) with a rate of $3.10 per machine hour and Department 2 (labor intensive) with a rate of 50 70 per direct labor hour. The consumption of these two drivers is as follows Department 1 Machine Hours Department 2 Direct Labor Hours Model A 8,000 135,000 Model B 160.000 270,000 1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. (Round to two decimal places) Plantwide rate: $ per DLH Model A $ overhead cost per unit Model B. $ overhead cost per unit 2. Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead costs to two decimal places.) Model A $ overhead cost per unit Model B: $ overhead cost per unit Note: Be sure to complete both tables below. Activity Driver Activity Rate Setups $ per Inspections per $ $ Machining per > Maintenance per Overhead assignment Model A Model B Setups $ $ Inspections Machining Maintenance Total overhead $ $ -Units produced Overhead per unit $ $ 3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments Department 1 (machine intensive) with a rate of $3.10 per machine hour and Department 2 (labor intensive) with a rate of $0.70 per direct labor hour. The consumption of these two drivers is as follows: Department 1 Machine Hours Department 2 Direct Labor Hours Model A 8,000 135,000 Model B 160.000 270,000 Compute the overhead cost per unit for each product by using departmental rates. (Round to two decimal places) Model : $ per unit Model B: 5 per unit
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