Required information Problem 4-16 Contrasting ABC and Conventional Product Costs (LO4-2, LO4-3, LO4-4] The following information applies to the questions displayed below For many years. Thomson Company manufactured a single product caed LEC 40. Then three years ago, the Company automated a portion of ts plant and at the same time introduced a second product called LEC 90 that has become increasingly popular The LEC 90 is a more complex product requiring 0,80 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.50 hours of direct labor time per unit and only a small amount of machining Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours, Despite the growing popularity of the company's new LEC 90. profits have been declining steadily. Management is beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor costs per unit are as follows: LEC 40 LEC 90 $28.00 $48.00 Direct materials Direct labor (0.60 hours and 0.30 hours $10.00 per hour) $ 6.00 $ 0.00 Management estimates that the company will incur $988,000 in manufacturing overhead costs during the current year and 60,000 units of the LEC 40 and 20,000 units of the LEC 90 will be produced and sold. Problem 4-16 Part 1 Required: 1-a. Compute the predetermined overhead rate assuming that the company continues to apply manufacturing overhead cost on the basis of direct labor-hours. 1-0. Using this rate and other data from the problem, determine the unit product cost of each product. Complete this question by entering your answers in the tabs below. Reg 1A Req 1B Compute the predetermined overhead rate assuming that the company continues to apply manufacturing overhead cost on the basis of direct labor-hours. (Round your answer to 2 decimal places.) Predetermined overhead per DLH Req 1A Reg 1B > Problem 4-16 Part 2 2. Management is considering using activity-based costing to assign manufacturing overhead cost to products. The activity-based costing system would have the following four activity cost pools. Estimated Overhead Cost $161,000 hetivity cont Pool Maintaining parts Inventory processing purchase orders Quality control Machine-related Activity Measure Number of part types Number of purchase orders Number of tests run Machine-hours 80,000 66,000 681000 $998.000 hetivity Measure Number of part types Number of purchase orders Number of tests run Machine-hours Expected Mtivity LEC 40 TEC 90 Total 450 700 1,150 1.600 400 2,000 700 1.500 2.200 1,600 10,400 12.000 Determine the activity rate for each of the four activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Maintaining inventory Processing purchase orders Quality control Machine-related Activity Rate per part type per order per test per MH Problem 4-16 Part 3 3. Using the activity rates you computed in part (21. do the following: a. Determine the per unit amount of manufacturing overhead cost that would be assigned to each product using the activity-based costing system b. Compute the unit product cost of each product. Complete this question by entering your answers in the tabs below. Reg 3A Req 3B Using the activity rates you computed in part (2), determine the per unit amount of manufacturing overhead cost that would be assigned to each product using the activity- based costing system. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Show less Manufacturing overhead per unit of LEC 40 Manufacturing overhead per unit of LEC 90 Reg 3A Req3B >
