Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly. Manufacturing overhead is assigned to products on the basis of direct labor-hours. For the current year, the company has estimated that it will incur $6,618,850 in manufacturing overhead cost and produce 13,000 units of the deluxe model and 119,000 units of the regular model. The deluxe model requires 1.0 hours of direct labor time per unit, and the regular model requires 0.5 hour. Material and labor costs per unit are as follows: Direct materials Direct labor Model Deluxe Regular $ 149 $ 109 $ 14 $ 6 Required: 1-a. Using direct labor-hours as the base for assigning manufacturing overhead cost to products, compute the predetermined overhead rate. 1-b. Using the predetermined overhead rate computed in 1-a above and other data from the problem, determine the unit product cost of each model. 2. Management is considering using activity-based absorption costing to apply manufacturing overhead cost to products. The activity- based system would have the following four activity cost pools: Activity Cost Pool Purchasing Processing Scrap/rework Shipping Activity Measure Purchase orders issued Machine-hours Scrap/rework orders issued Number of shipments Estimated Overhead Cost $ 316,050 4,165,000 550,800 1,587,000 $6,618,850 Activity Measure Purchase orders issued Machine-hours Scrap/rework orders issued Number of shipments Expected Activity Deluxe Regular Total 490 980 1,470 19,600 29,400 49,000 450 360 810 5,520 8,280 13,800 Determine the predetermined overhead rate for each of the four activity cost pools. 3. Using the predetermined overhead rates you computed in part (2), do the following: a. Compute the total amount of manufacturing overhead cost that would be applied to each model using the activity-based absorption costing system. After these totals have been computed, determine the amount of manufacturing overhead cost per unit of each model. b. Compute the unit product cost of each model (including direct materials, direct labor, and manufacturing overhead). Complete this question by entering your answers in the tabs below. Req 1A Req 1B Reg 2 Reg Reg 3B Using direct labor-hours as the base for assigning manufacturing overhead cost to products, compute the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH Req 1A Req 1B > Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req Req 3B Using the predetermined overhead rate computed in 1-a above and other data from the problem, determine the unit product cost of each model. (Round your intermediate calculations and final answers to 2 decimal places.) Model Regular Deluxe Unit product cost
