Question
Sunland makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and
Sunland makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $2,200,000: Rate Assembly $0.80 per direct labor hour Fabrication $15 per machine hour Setups $20 per batch Bonding $128,000 direct to Complex Only the Complex product requires bonding, so all the costs of bonding should be allocated to Complex. The following data relate to both products. Simple Complex Units produced 100,000 40,000 Direct labor hours 220,000 170,000 Machine hours 80,000 30,000 Batches 1,500 4,000
Using the traditional method of allocating overhead costs,
allocate overhead cost to the products. | |
show that the overhead assigned to each product sums to the total company overhead. | |
determine the overhead cost per unit for each product. |
Simple | Complex | Total | ||||
---|---|---|---|---|---|---|
Machine hours | enter a number of hours | enter a number of hours | ||||
Overhead rate | $enter a dollar amount rounded to 2 decimal places | $enter a dollar amount rounded to 2 decimal places | ||||
Total overhead to product | $enter a total amount | $enter a total amount | $enter a total amount |
Simple | Complex | |||
---|---|---|---|---|
Total overhead to product | $enter a dollar amount | $enter a dollar amount | ||
Number of units produced | enter a number of units | enter a number of units | ||
Overhead per unit | $enter a dollar amount rounded to 2 decimal places | $enter a dollar amount rounded to 2 decimal places |
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