Thornton Marine manufactures marine radios in three models the 1600 model for the small boat enthusiast who will not venture far from shore, and the 2400 and 3600 models for those with the need for more features, range, and sensitivity Thornton manufactures only these three products Thornton uses a volume based costing system that is based on direct labor hours to allocate manufacturing overhead costs to product line Thornton has the following manufacturing overhead activities and the budgeted overhead costs for the coming year Thornton is considering an ABC approach to allocate overhead costs to product lines and has selected the following cost drivers for each activity Activity Driver Setup labor Number of setups Equipment Machine hours Assembly Direct labor hours Materials handling Weight of materials Purchasing Materials cost Inspection Number of orders shipped Thornton also has the following budgeted production data for the three products Required (4 points) Using the current volume based system, calculate the following items Show calculations to earn points Overhead rate per direct labor hour Overhead cost per unit for each of the three products Production cost per unit for each of the three products (10 points) Using the ABC method, calculate the following items Show calculation to earn points Overhead (activity) rate for each activity measure Overhead cost per unit for each of the three products Production cost per unit for each of the three products (3 points) Compute profit per unit for each product line under the current system and that under the ABC Show calculations Comment on the differences in the results and the consequences of using inaccurate product cost information Be sure to relate your discussion to your calculations Activity Setup labor Equipment Assembly Materials handling Purchasing Inspection Cost $ 230,000 136,700 740,200 404,500 92 800 327,000 $ 1 931 200 Units produced Selling price per unit Direct material cost per unit Direct labor hours per unit Direct labor cost per unit S S Product Lines 1600 2400 9,000 3,700 200 $ 350 $ 42 $ 75 $ 4 5 60 $ 80 $ 3600 800 600 83 6 100 $ Number of setups Machine hours Direct labor hours Weight of materials (pounds) Material cost Number of orders shipped 16 42 57,000 30,000 36,000 18,500 10,000 12,000 378,000 $ 277,500 $ 200 370 42 9,000 4,800 5,000 66,400 750 S

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Thornton Marine manufactures marine radios in three models: the 1600 model for the small boat enthusiast who will not venture far from shore, and the

Thornton Marine manufactures marine radios in three models: the 1600 model for the small boat enthusiast who will not venture far from shore, and the 2400 and 3600 models for those with the need for more features, range, and sensitivity. Thornton manufactures only these three products. Thornton uses a volume-based costing system that is based on direct labor hours to allocate manufacturing overhead costs to product line. Thornton has the following manufacturing overhead activities and the budgeted overhead costs for the coming year:

image text in transcribed

Thornton is considering an ABC approach to allocate overhead costs to product lines and has selected the following cost drivers for each activity:

Activity	Driver
Setup labor	Number of setups
Equipment	Machine-hours
Assembly	Direct labor-hours
Materials handling	Weight of materials
Purchasing	Materials cost
Inspection	Number of orders shipped

Thornton also has the following budgeted production data for the three products:

image text in transcribed

Required:

(4 points) Using the current volume-based system, calculate the following items. Show calculations to earn points.
1. Overhead rate per direct labor hour
2. Overhead cost per unit for each of the three products
3. Production cost per unit for each of the three products

(10 points) Using the ABC method, calculate the following items. Show calculation to earn points.
1. Overhead (activity) rate for each activity measure
2. Overhead cost per unit for each of the three products
3. Production cost per unit for each of the three products

(3 points) Compute profit per unit for each product line under the current system and that under the ABC. Show calculations. Comment on the differences in the results and the consequences of using inaccurate product cost information. Be sure to relate your discussion to your calculations.

Activity Setup labor Equipment Assembly Materials handling Purchasing Inspection Cost $ 230,000 136,700 740,200 404,500 92.800 327,000 $ 1.931.200 Units produced Selling price per unit Direct material cost per unit Direct labor hours per unit Direct labor cost per unit S S Product Lines 1600 2400 9,000 3,700 200 $ 350 $ 42 $ 75 $ 4 5 60 $ 80 $ 3600 800 600 83 6 100 $ Number of setups Machine hours Direct labor hours Weight of materials (pounds) Material cost Number of orders shipped 16 42 57,000 30,000 36,000 18,500 10,000 12,000 378,000 $ 277,500 $ 200 370 42 9,000 4,800 5,000 66,400 750 S