Question
In: Accounting
consider the following data for two products of gitano manufacturing number id units produced product a...
consider the following data for two products of gitano
manufacturing
number id units produced product a 11,500 units product b 1300
units
direct labor cost (@ $27 per DLH) product a 0.14 DLH per unit
product b 0.28 DLH per unit
direct materials cost product a $2 per unit product b $2.50
per unit
machine setup overhead costs $51,176
materials handling $ 55,000
quality control inspections $79,380
total $ 185,556
round to two decimal places
1.
use direct labor hours as the basis for assigning overhead costs,
determine the total production costs per unit for each product line
2. if the market price for product a is $24.06 and the market
price for product b is $57, determine the profit or loss per unit
for each product.
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 b.
4. determine the profit or loss per unit for each product
assuming abc costing
Solutions
Expert Solution
| Gitano Manufacturing | ||||||
| 1) Statement of Production Cost per unit | ||||||
| All Figs in $ | ||||||
| Particulars | Product A | Product B | ||||
| Units Produced | 11500 | 1300 | ||||
| Direct Material Cost | $2 per unit | 23000 | $2.5 per unit | 3250 | ||
| Direct Labour Cost (Note b) | $27 x 0.14 | 43470 | $27 x 0.28 | 9828 | ||
| Manufacturing overhead (Note c) | 151340 | 34216 | ||||
| Total Production Cost | 217810 | 47294 | ||||
| Production cost per unit | 18.94 | 36.38 | ||||
| 2) Statement of profit or loss per unit for each product | ||||||
| Particulars | Product A | Product B | ||||
| Market Price per unit (A) | 24.06 | 57 | ||||
| Production Cost per unit (B) | 18.94 | 36.38 | ||||
| Profit Per Unit (A-B) | 5.12 | 20.62 | ||||
| Workings: | Product A | Product B | Total | |||
| a) Cal. Of Direct Labour Hour | ||||||
| For 1 unit | 0.14 hr | 0.28 hr | ||||
| Total Direct Labour Hour | For 11500 units | 1610 hr | For 1300 units | 364 | ||
| b) Total Direct Labour Cost | 1610 x $27 | 43470 | 364 x $27 | 9828 | ||
| c) Manufacturing overhead | ||||||
| Machine setup Overhead Cost | 51176 | |||||
| Materials Handling | 55000 | |||||
| Quality Control inspections | 79380 | |||||
| Total | For 1610 hr | 151340 | For 364 hr | 34216 | 185556 | |
| 3) Statement of Cost per unit under ABC | ||||||
| Particulars | Product A | Product B | ||||
| Units Produced | 11500 | 1300 | ||||
| Direct Material Cost | $2 per unit | 23000 | $2.5 per unit | 3250 | ||
| Direct Labour Cost (Note b) | $27 x 0.14 | 43470 | $27 x 0.28 | 9828 | ||
| Manufacturing overhead (Note d) | 162471 | 23085 | ||||
| Total Production Cost | 228941 | 36163 | ||||
| Production cost per unit | 19.91 | 27.82 | ||||
| 4) Statement of profit or loss per unit for each product under ABC | ||||||
| Particulars | Product A | Product B | ||||
| Market Price per unit (A) | 24.06 | 57 | ||||
| Production Cost per unit (B) | 19.91 | 27.82 | ||||
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10,500 units
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Total number of machine set-ups
A
5,000
20,000
160
20
B
60,000
120,000
384
44
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Volume Related Activity Costs
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Purchase Related Costs
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Multiple Choice
$145,000
$149,750
$159,500
$174,000
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