Question

Visaudiotech plans to sell 71,500 4TD remote controls in the year 2020/2021 at $150 each. The sales budget for 2020/2021 includes the sale of 44,000 SHTL remote controls at $325 each. No behinning or ending inventory budgeted for the year.

Budgeted direct materials costs are $12,826,000 in total, for production of the two types of remote control with $6,534,000 being the total budgeted cost for SHTL direct materials. Direct labour is budgeted at $15.40 per direct labour hour (DLH). The company expects to use 4 DLH and 1.5 machine hours (MH) each SHTL remote control and 1.5 DLH and 0.5 MH for each 4TD remote control produced. VisAudioTech applies a materials handling charge at 10% of dorect materials cost, which is not included in variable factory overhead. Variable manufacturing overhead is applied on the basis of direct labour hours. For 2020/2021 the budgeted variable manufacturing overhead rate is $4.75/DLH. In addition, machine related overhead is applied on the basis of MH and is budgeted at $20.50/MH.

Question:

Based on activity based costing system, calculate the total cost and unit cost expected for the 4TD and SHTL remote controls.

Answer 1

	4TD Remote Control	SHTL Remote Control
Direct materials cost	$6,292,000	$6,534,000
Direct labor hour 4TD = 71,500*1.5 DLH*$15.40 SHTL = 44,000 * 4 DLH * $15.40	$1,651,650	$2,710,400
Variable Factory Overheads:
Material Handling Charges (10% of direct materials cost)	$629,200	$653,400
Variable manufacturing overheads DLH related     4TD = 71,500*1.5 DLH*$4.75     SHTL = 44,000 * 4 DLH * $4.75	$509,437.50	$836,000
Machine related variable overheads 4TD = 71,500 * 0.5 MH * $20.50 SHTL = 44,000 * 1.5 MH * $20.50	$732,875.00	$1,353,000.00
Total Variable factory overheads	$1,871,512.50	$2,842,400
Total Costs	$9,815,162.50	$12,086,800
Divide by: Number of Units	71500	44000
Unit Cost	$137.28	$274.70

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