Question
In: Accounting
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:...
Stillicum Corporation makes ultra light-weight backpacking
tents. Data concerning the company’s two product lines appear
below:
| Deluxe | Standard | |||||
| Direct materials per unit | $ | 59.00 | $ | 47.00 | ||
| Direct labor per unit | $ | 17.00 | $ | 14.00 | ||
| Direct labor-hours per unit | 0.70 | DLHs | 1.40 | DLHs | ||
| Estimated annual production | 10,000 | units | 50,000 | units | ||
The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:
| Estimated total manufacturing overhead | $ | 627,000 | |
| Estimated total direct labor-hours | 77,000 | DLHs | |
*****Determine the unit product costs of the Deluxe and Standard products under the company’s traditional costing system.*****
The company is considering replacing its traditional costing
system with an activity-based absorption costing system that would
have the following three activity cost pools:
| Expected Activity | |||||
| Activity Cost Pools and Activity Measures |
Estimated Overhead Cost |
Deluxe | Standard | Total | |
| Supporting direct labor (direct labor-hours) | $ | 462,000 | 7,000 | 70,000 | 77,000 |
| Batch setups (setups) | 105,000 | 200 | 100 | 300 | |
| Safety testing (tests) | 60,000 | 30 | 70 | 100 | |
| Total manufacturing overhead cost | $ | 627,000 | |||
****Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.*****
Solutions
Expert Solution
| a. | |||||||||||
| Deluxe | Standard | ||||||||||
| Direct Materials per unit | $ 59.00 | $ 47.00 | |||||||||
| Direct Labor per unit | $ 17.00 | $ 14.00 | |||||||||
| Manufacturing overhead per unit | $ 5.70 | $ 11.40 | |||||||||
| Unit Cost | $ 81.70 | $ 72.40 | |||||||||
| Working: | |||||||||||
| a. | Manufacturing overhead per direct labor hour | ||||||||||
| = | Total Manufacturing overhead/Total direct laboor hours | ||||||||||
| = | $ 6,27,000 | / | 77,000 | ||||||||
| = | $ 8.14 | ||||||||||
| b. | Manufacturing overhead applied to: | ||||||||||
| Direct Labor hours per unit | Overhead per labor hour | Overhead Cost | |||||||||
| Deluxe | 0.70 | $ 8.14 | $ 5.70 | ||||||||
| Standard | 1.40 | $ 8.14 | $ 11.40 | ||||||||
| b. | Deluxe | Standard | |||||||||
| Direct Materials per unit | $ 59.00 | $ 47.00 | |||||||||
| Direct Labor per unit | $ 17.00 | $ 14.00 | |||||||||
| Manufacturing overhead per unit | $ 13.00 | $ 9.94 | |||||||||
| Unit Cost | $ 89.00 | $ 70.94 | |||||||||
| Working: | |||||||||||
| a. | Calculation of Activity rates: | ||||||||||
| Activity Cost Pools and Activity Measures | |||||||||||
| Estimated Overhead Cost |
Total Actiivty | Actiivty Rate | |||||||||
| Supporting direct labor (direct labor-hours) | $ 4,62,000 | 77000 | $ 6.00 | ||||||||
| Batch setups (setups) | $ 1,05,000 | 300 | $ 350.00 | ||||||||
| Safety testing (tests) | $ 60,000 | 100 | $ 600.00 | ||||||||
| $ 6,27,000 | |||||||||||
| b. | Calculation of overhead assignment; | ||||||||||
| Deluxe | Standard | ||||||||||
| Quantity | Activity rate | Overhead Cost | Quantity | Activity rate | Overhead Cost | ||||||
| Supporting direct labor (direct labor-hours) | 7,000 | $ 6.00 | $ 42,000 | 70,000 | $ 6.00 | $ 4,20,000 | |||||
| Batch setups (setups) | 200 | $ 350.00 | $ 70,000 | 100 | $ 350.00 | $ 35,000 | |||||
| Safety testing (tests) | 30 | $ 600.00 | $ 18,000 | 70 | $ 600.00 | $ 42,000 | |||||
| Total Manufacturing overhead cost | $ 1,30,000 | $ 4,97,000 | |||||||||
| / Number of units produced | 10,000 | 50,000 | |||||||||
| Manufacturing cost per unit | $ 13.00 | $ 9.94 | |||||||||
ekkarill92 answered 1 year agoRelated Solutions
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:...
Stillicum Corporation makes ultra light-weight backpacking
tents. Data concerning the company’s two product lines appear
below:
Deluxe
Standard
Direct materials per unit
$
64.00
$
52.00
Direct labor per unit
$
22.00
$
18.00
Direct labor-hours per unit
0.70
DLHs
1.40
DLHs
Estimated annual production
10,000
units
50,000
units
The company has a traditional costing system in which
manufacturing overhead is applied to units based on direct
labor-hours. Data concerning manufacturing overhead and direct
labor-hours for the upcoming year appear...
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:...
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Standard
Direct materials per unit
$
56.00
$
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Direct labor per unit
$
14.00
$
11.60
Direct labor-hours per unit
0.70
DLHs
1.40
DLHs
Estimated annual production
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units
50,000
units
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