Siegel Corporation manufactures a product available in both a deluxe and a regular model. The company has made the regular model for years: the deluxe model was introduced several years ago to capture a new segment of the market. Since the introduction of the deluxe model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly. Overhead is applied to products on the basis of direct labour-hours. At the beginning of the current year, management estimated that $1,301,100 in overhead costs would be incurred and the company would produce and sell 10,000 units of the deluxe model and 43,585 units of the regular model. The deluxe model requires 3.1 hours of direct labour time per unit, and the regular model requires 12 hours. Materials and labour costs follow: Deluxe Regular Direct materials cost per unit $155 Direct labour cost per hour 21 13 $91 Required: 1. Compute the predetermined overhead rate using direct labour hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. (Do not round intermediate calculations. Round your answers to 2 decimal places.) per DLH Predetermined overhead rate Unit product cost of Deluxe Unit product cost of Regular 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea, and it came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities follow: Estimated Activity Cost Pool and Activity Overhead Activity Measure Cost Deluxe Regular Total Purchase orders (number of orders) $ 172,200 800 1,300 2,100 Rework requests (number of requests) 266,400 400 800 1,200 Product testing (number of tests) 262,500 5,000 12,500 17,500 Machine related (machine-hours) 600,000 10,000 20,000 30,000 $1,301, 100 Compute the activity rate (.e. predetermined overhead rate) for each of the activity cost pools. Activity Cost Pool Purchase orders Rework requests Product testing Machine related Activity Rate per order per request per test per MH 3. Assume that actual activity is as expected for the year. Using activity-based costing, do the following: a. Determine the total amount of overhead that would be applied to each model for the year (Do not round intermediate calculations and round your final answers to nearest whole dollar amount.) Deluxe Total overhead cost Regular b. Compute the unit product cost for one unit of each model. (Do not round intermediate calculations and round your answers to 2 decimal places.) Deluxe Regular Unit product cost
