THIS IS A MULTI-STEP PROBLEM

Perdon Corporation manufactures safeslarge mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The following information relates to overhead.

VideoPlus, Inc. manufactures two types of DVD players, a deluxe model, and a standard model. Annual production is 50,000 units for the deluxe and 20,000 units for the standard. Both require 2 hours of direct labor for completion. Therefore, the total annual direct labor hours are 140,000 [2 hrs. (20,000 + 50,000)]. The expected annual manufacturing overhead is $1,050,000. Thus, the predetermined overhead rate is $7.50 ($1,050,000 140,000) per direct labor hour. The direct materials cost per unit is $42 (deluxe) and $11 (standard) model. The direct labor cost is $18 per unit for both the deluxe and standard models. The companys managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.

*** I HAVE DONE MAJORITY OF THE WORK BELOW. I AM NOT SURE IF IT IS CORRECT. ANY INSIGHT IS HELPFUL***

Instructions

(a) Under traditional product costing, compute the total unit cost of both products. Prepare a comparative schedule of the individual costs by product.

(b) Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).

(c) Prepare a schedule assigning each activitys cost pool to each product based on the use of cost drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.)

(d) Compute the total cost per unit for each product under ABC.

(f) Comment on:

(1) the comparative overhead cost per unit for the two products under ABC, and

(2) the comparative total costs per unit under traditional costing and ABC.

Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line Mobile Safes 200 300 450 800 Walk-In Safes 50 200 350 1,700 (a) Traditional Costing Traditional Costing Formula: (Total Cost / Total Hours) = $ rate per DLH (direct labor hour) (a1) ONE MOBILE safe overhead cost is: $416 (Direct Labor Hours x Rate per DLH) then divided by ??? 260,000 / (800+1,700) * 800/200 (a2) ONE WALK-IN safe overhead cost is: $3,536 260,000 / (800+1,700*1700/50 (b) Activity Based Costing Materials Handling costs: A-B-C Formula ... for Materials: (Total Material Handling Cost / Total # Moves) - $ per move (1a) ONE MOBILE safe materials cost is: (15) ONE WALK-IN safe materials cost is: Purchasing Activity costs: A-B-C Formula ... for Purchasing Activites: (2a) ONE MOBILE safe purchasing activities cost is: (2b) ONE WALK-IN safe purchasing activities cost is: (c) Comparison: Traditional vs Activity-Based Costing Recap: The overhead allocated to each unit of the two products is: Traditional Costing Activity Based Costing UNIT Costs Mobile Safe Walk-in Safe Activity Cost Pool Purchasing Receiving Assembling Testing Finishing Packing and shipping Cost Driver Orders Pounds Number of parts Number of tests Units Pounds Expected Use of Drivers Estimated Expected Use by Product Overhead of Cost Drivers Standard Deluxe $ 126,000 400 100 300 30,000 20,000 4,000 16,000 444,000 74,000 20,000 54,000 115,000 23,000 10,000 13,000 140,000 70,000 20,000 50,000 195,000 80,000 18,000 62,000 $1.050.000 Costs (a) Computation of unit costs-traditional costing. Products Manufacturing Standard Deluxe Model Model Direct Materials 11 42 Direct Labor 18 18 Overhead 15.00 15.00 Total Unit Cost 44.00 75.00 (b) computation of A-B-C overhead rates per cost driver Estimated Expected Use of Activity Cost Pool Overhead Cost Drivers | Purchasing 126,000 400 orders Receiving 30,000 20,000 pounds Assembling 444,000 74,000 parts Testing 115,000 23,000 tests Finishing 140,000 70,000 units Packing & Shipping 195,000 80,000 pounds Activity-Based Overhead Rate 315 1.5 6 5 2.4375 (c) 100 Activity Cost Pools Purchasing Receiving Assembling Testing Finishing Packing & Shipping Total Costs Assigned Units Produced Overhead Cost Per Unit Standard Model Expected Overhead Use of Drivers Rates 126,000 4,000 30,000 20,000 444,000 10,000 115,000 20,000 140,000 Cost Assigned 31,500 6,000 120,000 50,000 40,000 Deluxe Model Expected Use Overhead of Drivers Rates 300 16,000 54,000 13,000 50,000 Cost Assigned 94,500 24,000 324,000 65,000 100,000 18,000 195,000 43,875 62,000 151,125 291,375 758,625 20,000 50,000 (d) ABC Manufacturing Costs Direct Materials Direct Labor Overhead Total Unit Cost Products Standard Deluxe Model Model 11 42 18 18 14.57 15.17 43.57 75.17 (6) Don't forget this:_(see answers below for "guidance")