Question

LeGarrette Football Products (LFP) manufactures two products for football: helmets and shoulder pads. LFP estimated it would incur $182,910 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: Helmets Shoulder Pads Estimated volume 4,050 units 3,250 units Direct labor-hours per unit 1.70 hours 1.30 hour Direct materials cost per unit $ 14.10 $ 26.70 Direct labor cost per unit $ 12.80 $ 9.20 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 Helmets Shoulder Pads Total Machine setups $ 12,690 160 170 330 Purchase orders 76,740 920 1,260 2,180 General factory 93,480 6,885 4,225 11,110 Total $ 182,910 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. Predetermined overhead tate = Estimated manufacturing overheads/Estimated direct labor hours = $182910/11110 = $16.46 per direct labor hour

Estimated direct labor hours = (4050 x 1.70) + (3250 x 1.30) = 6885 + 4225 = 11110

a-2.

	Helmets	Shoulder Pads
Direct materials	14.10	26.70
Direct labor	12.80	9.20
Manufacturing overheads	27.982	21.398
	(1.70 x $16.46)	(1.30 x $16.46)
Unit product cost $	54.88	57.30

b.

	Helmets	Shoulder Pads
Direct materials	14.10	26.70
Direct labor	12.80	9.20
Manufacturing overheads	23.81	26.59
Unit product cost $	50.71	62.49

Activity Cost Pool	Estimated Overhead Costs $	Total Expected Activity	Activity Rate $	Helmets		Shoulder Pads
				Expected Activity	Overheads Allocated	Expected Activity	Overheads Allocated
Machine setups	12690	330	38.45	160	6152.00	170	6536.50
Purchase orders	76740	2180	35.20	920	32384.00	1260	44352.00
General factory	93480	11110	8.41	6885	57902.85	4225	35532.25
	182910				96438.85		86420.75
Number of units					4050		3250
Overheads per unit $					23.81		26.59