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Solomon Electronics produces video games in three market categories: commercial, home, and miniature. Solomon has traditionally allocated overhead costs to the three products using
Solomon Electronics produces video games in three market categories: commercial, home, and miniature. Solomon has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Unit Batch Product Facility Total Pooled Cost $ 416,000 236,400 119,600 314,000 Types of Costs Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling Research and development Cost Driver Machine hours Number of production orders Time spent by research department Rent, general utilities, maintenance, facility depreciation, Square footage administrative salaries Additional data for each of the product lines follow: Commercial Home Direct materials cost $ 25.14 per unit $ 15.14 per unit Direct labor cost $ 10.70 per hour Number of labor hours Number of machine hours 6,000 10,000 $ 8.70 per hour 12,000 45,000 Miniature $ 12.14 per unit $9.70 per hour 2,000 25,000 Number of production orders 200 2,000 800 Research and development time Number of units 10% 20% 70% Square footage 15,000 20,000 45,000 50,000 14,000 30,000 Required Total 20,000 80,000 3,000 100% 74,000 100,000 a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines. Note: For all requirements, round intermediate calculations for allocation rates to 2 decimal places and all other calculations to the nearest whole dollar. Round "Cost per Unit" to 2 decimal places. Round your answers for "Total Cost" to the nearest whole dollar amount. Additional data for each of the product lines follow: Direct materials cost Direct labor cost Number of labor hours. Number of machine hours Number of production orders Research and development time Number of units Square footage Required Commercial $ 25.14 per unit $ 10.70 per hour 6,000 10,000 Home $ 15.14 per unit $ 8.70 per hour 12,000 Miniature $ 12.14 per unit $ 9.70 per hour 2,000 25,000 45,000 200 2,000 800 10% 20% 70% 15,000 20,000 45,000 50,000 14,000 30,000 Total - 20,000 80,000 3,000 100% 74,000 100,000 a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines. Note: For all requirements, round intermediate calculations for allocation rates to 2 decimal places and all other calculations to the nearest whole dollar. Round "Cost per Unit" to 2 decimal places. Round your answers for "Total Cost" to the nearest whole dollar amount. Type of Product Total Cost Cost per Unit a. Commercial a. Home a. Miniature Combined total b. Commercial b. Home b. Miniature Combined total
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