Question

1. Globe Company manufactures product Z97, which incurs costs of $175 for direct materials and $140 for direct labour per unit. The company estimated its production overhead and direct labour hours for the month as follows:

	Department A	Department B	Department C
Overhead costs	$95,000	$127,000	$83,000
Direct labour hours	4,500	12,000	5,500

Each unit of product Z97 is produced using:

• 15 labour hours in department A
• 10 labour hours in department B, and
• 9 labour hours in department C

Calculate the cost of one unit of product Z97 using a company-wide overhead rate assuming the allocation base is direct labour hours.

2. Jetsons Jetpacks manufactures jetpacks and uses divisional-based costing to allocate overhead on the basis of direct labour hours. Direct materials and direct labour costs per sprocket are $197 and $103, respectively.

Producing one jetpack requires 32 labour hours comprised of:

• 15 hours in machining
• 10 hours in assembly, and
•   7 hours in finishing

Information for each department is as follows:

	Cutting	Assembly	Finishing
Overhead costs	$185,000	$102,000	$75,000
Direct labour hours	30,000	8,000	15,000

Calculate the total cost of producing one jetpack.

3. Bedazzled Jewellers manufactures bracelets and necklaces, and uses activity-based costing to allocate its overhead costs. The annual production of bracelets and necklaces is 2,300 and 3,500 respectively. The cost driver for each activity is machine hours. Information relating to each activity is as follows:

		Number of Machine Hours
Activity Cost Pool	Estimated Overhead	Bracelet	Necklace	Total
Activity 1: Molding	$25,000	250	300	550
Activity 2: Finishing	$42,000	750	550	1,300
Activity 3: Polishing	$78,000	1,900	1,700	3,600

Calculate the overhead cost per bracelet.

Answer 1