Question

Cabat Company manufactures two products, Product C and Product D. The company estimated it would incur $190,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period’s operations appear below:

	Product C			Product D
Estimated volume		4,450	units			3,650	units
Direct labor-hours per unit		2.50	hours			2.10	hour
Direct materials cost per unit	$	18.10			$	31.50
Direct labor cost per unit	$	16.00			$	12.40

Requried:
a-1.	Compute the predetermined overhead rate under the current method. (Round your answer to 2 decimal places.)

           

a-2.	Determine the unit product cost of each product for the current year. (Do not round your intermediate calculations. Round your final answer to 2 decimal places.)

          

b.

The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:

   

Activity Cost Pools	Estimated Overhead Costs		Expected Activity
			Product C	Product D	Total
Machine setups	$	13,490	240	250	490
Purchase orders		79,140	1,080	1,420	2,500
General factory		98,280	11,125	7,665	18,790
Total	$	190,910

   

Determine the unit product cost of each product for the current period using the activity-based costing approach. (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

a.1	Manufacturing overhead	190910	$
	Total direct labour hours	18790	Hours
	Product C (4450 units *2.5 hour/unit) : 11,125 hours
	Product D (3650 units *2.1 hour/unit) : 7,665 hours
	Predetermined overhead rate ($ 11,125 / 7,665 hours)	10.16
a.2	Unit Product cost of each product
		Product C	Product D
	Direct material cost
	Product C (4450 units *$ 18.1/unit)	80545
	Product D (3650 units *$ 31.5/unit)		114975
	Direct Labour cost
	Product C (4450 units *$ 16/unit)	71200
	Product D (3650 units *$ 12.4/unit)		45260
	Manufacturing overhead
	Product C (11125 hours *$ 10.16/hour)	113032.13
	Product D (7665 hours *$ 10.16/hour)		77877.86855
	Total Product cost	2,64,777.13	2,38,112.87
	Unit Product cost	59.50	65.24
B.	ABC Costing
	Machine Setups (Ratio of 240:250)	6,607.35	6,882.65
	Purchase Orders (Ratio of 1080:1420)	34,188.48	44,951.52
	General Factory (Ratio of 11125:7665)	58,188.66	40,091.34
	Total Manufacturing overhead (A)	98,984.49	91,925.51
	No. of units (B)	4450	3650
	Manufacturing overhead/unit	22.24	25.19
	Unit Product cost of each product using ABC system
	Direct material cost/unit	18.10	31.50
	Direct Labour cost/unit	16.00	12.40
	Manufacturing overhead/unit	22.24	25.19
	Unit Product cost ($)	56.34	69.09