Steampunk Corporation has the following predicted indirect costs and cost drivers for 2019 for the given...

Steampunk Corporation has the following predicted indirect costs and cost drivers for 2019 for the given activity cost pools:

	Fabrication Department	Finishing Department	Cost Driver
Maintenance	$ 36,000	18,000	Machine hours
Materials handling	54,000	27,000	Material moves
Machine	126,000	9,000	Machine setups
Inspections	-	45,000	Inspection hours
Total	$ 216,000	$ 99,000

The following activity predictions were also made for the year:

	Fabrication Department	Finishing Department
Machine hours	5,000	2,500
Material moves	1,500	750
Machine setups	350	25
Inspection hours	-	500

It is assumed that the cost per unit of activity for a given activity does not vary between departments. Steampunk's president, Abner Punk, is trying to evaluate the company's product mix strategy regarding two of its product models, SW100 and SG150. The company has been using a company wide overhead rate based on machine hours but is considering switching to either department rates of activity-based rates. The production manager has provided the following data for the production of a batch of 100 units for each of these models:

	SW100	SG150
Direct materials cost	$ 12,000	$ 18,000
Direct labor cost	$ 4,800	$ 3,600
Machine hours (Fabrication)	250	350
Machine hours (Finishing)	100	50
Materials moves	20	40
Machine setups	5	10
Inspection hours	15	30

a. Determine the cost of one unit each of SW100 and SG150, assuming a company-wide overhead rate is used based on total machine hours.

Round rate to two decimal places.

Overhead rate based on total machine hours: $Answer per machine hour

Use rounded overhead rate calculated about for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places.

Product Costs per Unit	SW100	SG150
Direct materials	Answer	Answer
Direct labor	Answer	Answer
Manufacturing overhead	Answer	Answer
Total cost per batch	Answer	Answer
Number of units per batch	Answer	Answer
Cost per unit	Answer	Answer

b. Determine the cost of one unit of SW100 and SG150, assuming department overhead rates are used. Overhead is assigned based on machine hours in both departments.

Round to two decimal places, if applicable.

Overhead rate based on machine hours for Fabrication Dept.: $Answer per machine hour.

Overhead rate based on machine hours for Finishing Dept.: $Answer per machine hour.

Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.

Product Costs per Unit	SW100	SG150
Direct materials	Answer	Answer
Direct labor	Answer	Answer
Manufacturing overhead:
Fabrication Dept.	Answer	Answer
Finishing Dept.	Answer	Answer
Total cost per batch	Answer	Answer
Number of units per batch	Answer	Answer
Cost per unit	Answer	Answer

c. Determine the cost of one unit of SW100 and SG150, assuming activity-based overhead rates are used for maintenance, materials handling, machine setup, and inspection activities.

Round rate to two decimal places, if applicable.

Activity-based overhead rates:
Maintenance	Answer
Materials handling	Answer
Machine setup	Answer
Inspection activities	Answer

Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.

Product Costs per Unit	SW100	SG150
Direct materials	Answer	Answer
Direct labor	Answer	Answer
Manufacturing overhead:
Maintenance activity	Answer	Answer
Materials handling activity	Answer	Answer
Machine setups activity	Answer	Answer
Inspections activity	Answer	Answer
Total cost per batch	Answer	Answer
Number of units per batch	Answer	Answer
Cost per unit	Answer	Answer

Solutions

Expert Solution

a.	Company-wide overhead rate=Total indirect costs/Total machine hours=(216000+99000)/(5000+2500)=315000/7500=$ 42 per MH
	Product Costs per Unit:
				SW 100	SG 150
	Direct materials cost			12000	18000
	Direct labor cost			4800	3600
	Manufacturing overhead			14700	16800
	(Machine hours*allocation rate)			(250+100)*42	(350+50)*42
	Total cost per batch		a	31500	38400
	Number of units per batch		b	100	100
	Cost per unit		a/b	315	384

b.	Department overhead rates=Total indirect cost for the department/Total machine hours for the department
	Fabrication Department:
	Department overhead rates=216000/5000=$ 43.2 per MH
	Finishing Department:
	Department overhead rates=99000/2500=$ 39.6 per MH

	Product Costs per Unit:
				SW 100	SG 150
	Direct materials cost			12000	18000
	Direct labor cost			4800	3600
	Manufacturing overhead
	(Machine hours*allocation rate)
	Fabrication Department			10800	15120
				(250*43.2)	(350*43.2)
	Finishing Department			3960	1980
				(100*39.6)	(50*39.6)
	Total cost per batch		a	31560	38700
	Number of units per batch		b	100	100
	Cost per unit		a/b	315.6	387

c.	Activity based overhead rates=Estimated overhead cost/Total cost driver volume

	Activity	Cost	Total cost driver volume	Activity rate
		a	b	a/b
	Maintenance	54000	7500	7.2	Per MH
		(36000+18000)	(5000+2500)
	Materials handling	81000	2250	36	Per move
		(54000+27000)	(1500+750)
	Machine	135000	375	360	Per setup
		(126000+9000)	(350+25)
	Inspections	45000	500	90	per inpection hour

	Product Costs per Unit:
				SW 100	SG 150
	Direct materials cost			12000	18000
	Direct labor cost			4800	3600
	Manufacturing overhead:
	Maintenance activity			2520	2880
	(Activity based overhead rate*cost driver usage)			(250+100)*7.2	(350+50)*7.2
	Materials handling activity			720	1440
	(Activity based overhead rate*cost driver usage)			(20*36)	(40*36)
	Machine setups activity			1800	3600
	(Activity based overhead rate*cost driver usage)			(5*360)	(10*360)
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Steampunk Corporation has the following predicted indirect costs and cost drivers for 2019 for the given...

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