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[The following information applies to the questions displayed below.] Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the

[The following information applies to the questions displayed below.]

Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

Direct Labor- Hours per Unit Annual Production Total Direct Labor-Hours
Model N 800 XL 2.5 3,500 units 8,750
Model N 500 1.3 12,500 units 16,250
25,000

Additional information about the company follows:

a.

Model N 800 XL requires $65 in direct materials per unit, and Model N 500 requires $25.

b. The direct labor wage rate is $16 per hour.
c.

The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.

d.

Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool Activity Measure Estimated Overhead Cost
Machine setups Number of setups $ 510,000
Special processing Machine-hours 230,000
General factory Direct labor-hours 1,410,000
$ 2,150,000

Expected Activity

Activity Measure Model N 800 XL Model N 500 Total
Number of setups 200 300 500
Machine-hours 20,000 0 20,000
Direct labor-hours 8,750 16,250 25,000

Required information

Required:
1.

Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.

a. Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

b. Compute the unit product cost of each model. (Round your answers to 2 decimal places.)

Required information

2.

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products.

a(1)

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

a(2)

Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system. (Round your answers to 2 decimal places.)

b.

Compute the unit product cost of each model. (Round your answers to 2 decimal places.)

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