Question
Sullivan Company produces mathematical and financial calculators and operates at capacity. Data related to the two products follows. Mathematical Financial Annual production in units 25,000
Sullivan Company produces mathematical and financial calculators and operates at capacity. Data related to the two products follows.
|
| Mathematical | Financial |
| Annual production in units | 25,000 | 50,000 |
| Direct materials cost | $75,000 | $150,000 |
| Direct manufacturing labor cost | $25,000 | $50,000 |
| Direct manufacturing labor-hours | 1,250 | 2,500 |
| Machine-hours | 40,000 | 70,000 |
| Number of production runs | 50 | 50 |
| Inspection hours | 1,200 | 800 |
Total manufacturing overhead costs are:
|
| Total |
| Machining costs | $440,000 |
| Setup costs | 110,000 |
| Inspection costs | 120,000 |
Requirements
| 1. | Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product. |
| 2. | Compute the manufacturing cost per unit for each product. |
| 3. | How might Sullivan'smanagers use the new cost information from itsactivity-based costing system to better manage its business? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started