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In: Accounting

Q5 Elios Company produces two products, saws and drills. Three activities are used in their manufacture....

Q5 Elios Company produces two products, saws and drills. Three activities are used in their manufacture. These activities and their associated costs and bases are as follows:

Activity:

Stamping Budgeted Costs=$460,000 Activity Base=Machine Hours

Assembly Budgeted Costs=$648,000 Activity Base=Labor Hours

Setup Budgeted Costs=$160,000 Activity Base=Number of Setups

Activity Base: Saws Drills Total

Machine Hours 64,000 28,000 92,000

Labor Hours 16,000 92,000 108,000

Setups 20,000 60,000 80,000

Units Produced 16,000 32,000

(Each one is worth 5 points 25 points total)

What is the application rate for Stamping? _____________________________________

What is the application rate for Assembly? _____________________________________

What is the application rate for each Setup? ____________________________________

What is the overhead cost per unit for the Saws? $______________________________

What is the overhead cost per unit for the Drills? $______________________________

Expert Solution

Answer a.

Stamping:

Budgeted Cost = $460,000
Expected machine-hours = 92,000

Application Rate = Budgeted Cost / Expected machine-hours
Application Rate = $460,000 / 92,000
Application Rate = $5.00 per machine-hour

Assembly:

Budgeted Cost = $648,000
Expected labor-hours = 108,000

Application Rate = Budgeted Cost / Expected labor-hours
Application Rate = $648,000 / 108,000
Application Rate = $6.00 per labor-hour

Setups:

Budgeted Cost = $160,000
Expected number of setups = 80,000

Application Rate = Budgeted Cost / Expected number of setups
Application Rate = $160,000 / 80,000
Application Rate = $2.00 per setup

Answer b.

Saws:

Total Overhead Cost = 64,000 * $5.00 + 16,000 * $6.00 + 20,000 * $2.00
Total Overhead Cost = $456,000

Overhead Cost per unit = $456,000 / 16,000
Overhead Cost per unit = $28.50

Drills:

Total Overhead Cost = 28,000 * $5.00 + 92,000 * $6.00 + 60,000 * $2.00
Total Overhead Cost = $812,000

Overhead Cost per unit = $812,000 / 32,000
Overhead Cost per unit = $25.38

ekkarill92 answered 1 year ago

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