Question

Walnut Systems produces two different products, Product A, which sells for $135 per unit, and Product B, which sells for $192 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows:    

	Cost		Usage by Product A			Usage by Product B
Design (Engineering Hours)	$	157,724		218			306
Machining (Machine Hours)	$	546,840		1,150			3,190
Inspection (Batches)	$	26,400		41			19

Walnut manufactures 10,500 units of Product A and 6,900 units of Product B per month. Each unit of Product A uses $45 of direct materials and $17 of direct labor, while each unit of Product B uses $70 of direct materials and $31 of direct labor.

Required:

a. Calculate the activity rate for design.



b. Calculate the activity rate for machining.



c. Calculate the activity rate for inspection.

           

d. Determine the indirect costs assigned to Product A.



e. Determine the indirect costs assigned to Product B.



f. Determine the manufacturing cost per unit for Product A. (Round your answer to 2 decimal places.)



g. Determine the manufacturing cost per unit for Product B. (Round your answer to 2 decimal places.)



h. Determine the gross profit per unit for Product A. (Round your intermediate calculation to 2 decimal places. Round your answer to 2 decimal places.)



i. Determine the gross profit per unit for Product B. (Round your intermediate calculation to 2 decimal places. Round your answer to 2 decimal places.)

Answer 1

	Requirement a:
	Calculation of Activity Rate for Design:
A	Engineering Hours usage by Product A	218
B	Engineering Hours usage by Product B	306
C	Total Engineering Hours (A+B)	524	(218 + 306)
D	Design Costs	$157,724
E	Activity Rate for Design (D/C)	$301	($157,724 / 524)
	Requirement b:
	Calculation of Activity Rate for Machining:
A	Machine Hours usage by Product A	1,150
B	Machine Hours usage by Product B	3,190
C	Total Machine Hours (A+B)	4,340	(1,150 + 3,190)
D	Machining Costs	$546,840
E	Activity Rate for Machining (D/C)	$126	($546,840 / 4,340)
	Requirement c:
	Calculation of Activity Rate for Inspection:
A	Number of Batches of Product A	41
B	Number of Batches of Product B	19
C	Total Number of Batches (A+B)	60	(41 + 19)
D	Inspection Costs	$26,400
E	Activity Rate for Inspection (D/C)	$440	($26,400 / 60)
	Requirement d:
	Determination of Indirect Costs assigned to Product A:
	Activity	Activity Rate	Usage	Allocated Costs
	Design	$301	218	$65,618
	Machining	$126	1,150	$144,900
	Inspection	$440	41	$18,040
	Indirect Costs Assigned to Product A			$228,558
	Requirement e:
	Determination of Indirect Costs assigned to Product B:
	Activity	Activity Rate	Usage	Allocated Costs
	Design	$301	306	$92,106
	Machining	$126	3,190	$401,940
	Inspection	$440	19	$8,360
	Indirect Costs Assigned to Product B			$502,406
	Requirement f:
	Determination of Manufacturing Cost per unit for Product A:
A	Indirect Costs Assigned	$228,558
B	Units Manufactured	10,500
C	Indirect Cost per unit (A/B)	$21.77	($228,558 / 10,500)
D	Direct Materials	$45
E	Direct Labor	$17
F	Manufacturing Cost per unit (C+D+E)	$83.77	($21.77 + $45 + $17)
	Requirement g:
	Determination of Manufacturing Cost per unit for Product B:
A	Indirect Costs Assigned	$502,406
B	Units Manufactured	6,900
C	Indirect Cost per unit (A/B)	$72.81	($502,406 / 6,900)
D	Direct Materials	$70
E	Direct Labor	$31
F	Manufacturing Cost per unit (C+D+E)	$173.81	($72.81 + $70 + $31)
	Requirement h:
	Determination of Gross Profit per unit of Product A:
A	Selling Price per unit	$135
B	Manufacturing Cost per unit	$83.77
C	Gross Profit per unit (A-B)	$51.23	($135 - $83.77)
	Requirement i:
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