Sandstorm Manufacturing Inc. makes two types of industrial component parts—the LE100 and the UL600. It annually...

Sandstorm Manufacturing Inc. makes two types of industrial component parts—the LE100 and the UL600. It annually produces 58,000 units of LE100 and 12,300 units of UL600.The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

	LE100		UL600		Total
Direct materials	$	364,325	$	160,550	$	524,875
Direct labor	$	118,000	$	41,500	$	159,500

The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below:

Activity Cost Pool (and Activity Measure)	Manufacturing Overhead		Activity

			LE100		UL600		Total
Machining (machine-hours)	$	209,300		88,000		61,500		149,500
Setups (setup hours)		131,100		65		280		345
Product-level (number of products)		83,870		1		1		2
General factory (direct labor dollars)		54,230	$	118,000	$	41,500	$	159,500

Total manufacturing overhead cost	$	478,500

Required:

1-a.	Compute the plantwide overhead rate that would be used in the company’s conventional cost system. (Round your final answer to 2 decimal places.)

1-b.	Using the plantwide rate, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

2-a.	Compute the activity rate for each activity cost pool. (Round your Machining and General factory activity rates to 2 decimal places.)

2-b.	Using the activity rates, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Solutions

Expert Solution

	Requirement 1-a:
	Computation of Plantwide overhead rate based on conventional cost system:
A	Total Manufacturing Overhead Cost	$478,500
B	Direct Labor Dollars	$159,500
C	Plantwide Overhead Rate (A/B)	$3


	Requirement 1-b:
	Computation of Unit Product Cost using Plantwide Overhead Rate:
		LE100	UL600
A	Plantwide Overhead Rate	$3	$3
B	Direct Labor Dollars	$118,000	$41,500
C	Overheads Allocated (A*B)	354000	124500
D	Direct Materials	364325	160550
E	Total Product Cost (B+C+D)	$836,325	$326,550
F	Units Produced	58,000	12,300
G	Unit Product Cost (E/F)	$14.42	$26.55


	Requirement 2-a:
	Computation of Activity Rate for each activity cost pool:
		Machining	Setups	Product level	General Factory
A	Manufacturing Overhead	209300	131100	83870	54230
B	Activity Measure	149500	345	2	159500
C	Activity Rate per Cost Pool (A/B)	1.40	380.00	41935.00	0.34


	Requirement 2-b:
	Computation of Unit Product Cost using Activity Rates:
		LE100	UL600
A	Machine Hours	88000	61500
B	Machining Costs (A*1.4)	123200	86100
C	Setup Hours	65	280
D	Setup Costs (C*380)	24700	106400
E	Number of Products	1	1
F	Product Level Costs (E*41935)	41935	41935
G	Direct Labor Dollars	118000	41500
H	General Factory Overheads (G*0.34)	40120	14110
I	Total Overheads Allocated (B+D+F+H)	229955	248545
J	Direct Materials	364325	160550
K	Total Product Costs (G+I+J)	712280	450595
L	Units Produced	58,000	12,300
M	Unit Product Cost (K/L)	$12.28	$36.63

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It...

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 70,000 units of EX300 and 13,500 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: EX300 TX500 Total Direct materials $ 376,325 $ 172,550 $ 548,875 Direct labor $ 130,000 $ 47,500 $...

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It...

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: EX300 TX500 Total Direct materials $ 366,325 $ 162,550 $ 528,875 Direct labor $ 120,000 $ 42,500 $...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,770,300 Cost of goods sold 1,234,258 Gross margin 536,042 Selling and administrative expenses 590,000 Net operating loss $ (53,958 ) Hi-Tek produced and sold 60,300 units of B300 at a price of $21 per unit and 12,600 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,704,000 Cost of goods sold 1,222,415 Gross margin 481,585 Selling and administrative expenses 590,000 Net operating loss $ (108,415 ) Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,776,400 Cost of goods sold 1,233,700 Gross margin 542,700 Selling and administrative expenses 550,000 Net operating loss $ (7,300 ) Hi-Tek produced and sold 60,400 units of B300 at a price of $21 per unit and 12,700 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,645,900 Cost of goods sold 1,225,174 Gross margin 420,726 Selling and administrative expenses 590,000 Net operating loss $ (169,274 ) Hi-Tek produced and sold 60,100 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,691,400 Cost of goods sold 1,219,910 Gross margin 471,490 Selling and administrative expenses 570,000 Net operating loss $ (98,510 ) Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,702,000 Cost of goods sold 1,218,323 Gross margin 483,677 Selling and administrative expenses 590,000 Net operating loss $ (106,323 ) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,699,400 Cost of goods sold 1,245,844 Gross margin 453,556 Selling and administrative expenses 640,000 Net operating loss $ (186,444 ) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,695,400 Cost of goods sold 1,234,000 Gross margin 461,400 Selling and administrative expenses 640,000 Net operating loss $ (178,600 ) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 per unit....

Subjects