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Tamarindo Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor- intensive
Tamarindo Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor- intensive than Model B's. Model B is also the more popular of the two speakers. The following data have been gathered for the two products: Units produced per year Prime costs Direct labor hours Machine hours Production runs Inspection hours Maintenance hours Setup costs Inspection costs Machining Maintenance Total.. Overhead Costs Product Data Model A 30,000 $200,000 140,000 20,000 40 800 10,000 $ 360,000 280,000 320,000 360,000 $1,320,000 Model B 300,000 $2,000,000 300,000 200,000 60 1,200 90,000 Required 1. Compute the overhead cost per unit for each product using a plantwide rate based on direct labor hours. 2. Compute the overhead cost per unit for each product using activity-based costing. 3. Suppose that Tamarindo decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $4.66 per machine hour, and Department 2 (labor intensive) with a rate of $1.20 per direct labor hour. The consumption of these two drivers is given below: 4-17 Plantwide versus Departmental Rates; Product Costing Accuracy; Pool Rates LO2, LO3, LO4, LO5 EXCEL Department 1 Department 2 Machine Hours Direct Labor Hours Model A 10,000 Model B 170,000 130,000 270,000 Compute the overhead cost per unit for each product by using departmental rates. (Note: Round to two decimal places.) 4.Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate?
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