Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic.
Activity Handling materials Inspecting product Processing purchase orders Paying suppliers Insuring the factory Designing packaging Expected Costs $705,000 980,000 185,000 255,000 380,000 155,000 Expected Activity 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models Required: 1. Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours. 2. In January of this year, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate. Required 1 Required 2 Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead based budgeted direct labor hours. = 0 Required 1 Required 2 In January of this year, the Deluxe model required 2,500 direct labor hours and the basic model required 6,1 hours. Assign overhead costs to each model using the single plantwide overhead rate. (Round "OH cost" ans places.) Total DL Hours required Plantwide OH Rate Total Overhead Cost Deluxe model Basic model Expected Costs Activity Rate Activity Handling material Activity Driver 100,000 parts 1,500 batches 705,000 980,000 185,000 255,000 380,000 Inspecting product Processing orders Paying suppliers Insuring factory Designing packaging 700 orders 500 invoices 40,000 square feet 155,000 2 models 2,660,000 Assume that the following information is available for the company's two products for the first quarter of this year. Production volume Parts required Batches made Purchase orders Invoices Space occupied Models Deluxe Model 10,000 units 20,000 parts 250 batches 50 orders 50 invoices 10,000 sq. ft. 1 model Basic Model 30,000 units 30,000 parts 100 batches 20 orders 10 invoices 7,000 sq. ft 1 model Required: Compute activity rates for each activity and assign overhead costs to each product model using activity-based costing (ABC). What is the overhead cost per unit of each model? (Round activity rate and average OH cost per unit answers to 2 decimal places.) Activity Rate Cost driver quantity incurred OH Allocated Deluxe Activity Handling materials Inspecting product Processing orders Paying suppliers Insuring factory Designing packaging Basic Activity Rate Cost driver quantity incurred OH Allocated 0 Activity Handling materials Inspecting product Processing orders Paying suppliers Insuring factory Designing packaging 0 0 0 0 Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced Direct labor cost (@ $28 per DLH) Direct materials cost Product A 13,500 units 0.17 DLH per unit $ 1.80 per unit Product B 2,000 units 0.26 DLH per unit $ 2.30 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $ 151,640 58,000 60,600 $ 270, 240 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. 0 Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Product B Product A Product B 2. If the market price for Product A is $29.12 and the market price for Product B is $60, determine the profit or loss per unit for each product. Product A Product B Market price 3. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B? Product A Product B 5 30 Number of setups required for production Number of parts required Inspection hours required setups part/unit setups part/unit 8 5 58 hours 245 hours Machine setup 0 Materials handling 0 Quality control 01 Overhead Assigned Activity Driver Activity Rate Total Overhead Cost Product A Machine setup Materials handling Quality control $ 0 Product B Machine setup Materials handling Quality control $ 0 Product A Product B Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit 4. Determine the profit or loss per unit for each product assuming ABC costing. Product A Product B Market price 4.2 Based on your results in part 4, should the profit or loss per unit for each product influence company strategy? Yes O No
