Question

Slack 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	$20,000	$10,000	Machine hours
Materials handling	30,000	15,000	Material moves
Machine setups	70,000	5,000	Machine setups
Inspections	-	25,000	Inspection hours
	$120,000	$55,000

The following activity predictions were also made for the year:

	Fabrication Department	Finishing Department
Machine hours	10,000	5,000
Material moves	3,000	1,500
Machine setups	700	50
Inspection hours	-	1,000

It is assumed that the cost per unit of activity for a given activity does not vary between departments. Slack's president, Charles Slack, is trying to evaluate the company's product mix strategy regarding two of its five product models, ZX300 and SL500. The company has been using a company-wide overhead rate based on machine hours but is considering switching to either department rates or 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:

	ZX300	SL500
Direct materials cost	$12,000	$18,000
Direct labor cost	$5,000	$4,000
Machine hours (Fabrication)	500	700
Machine hours (Finishing)	200	100
Materials moves	30	50
Machine setups	5	9
Inspection hours	30	60

a. Determine the cost of one unit each of ZX300 and SL500, 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 above for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places.

Product Costs per Unit
	ZX300	SL500
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 ZX300 and SL500, assuming department overhead rates are used. Overhead is assigned based on machine hours in both departments.

Round rate 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
Product Costs per Unit
	ZX300	SL500
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 ZX300 and SL500, 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
	ZX300	SL500
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

Answer 1

Part 1

Overhead (120000+55000)		$                        175,000
Divided by: total machine hours (10000+5000)		15,000
Overhead rate per machine hour		$                             11.67
Overhead rate allocated to Model ZX300 ((500+200)*11.67)		$                       8,169.00
Overhead rate allocated to Model SL500 ((700+100)*11.67)		$                       9,336.00
	ZX300	SL500
Direct materials	$                                     12,000	$                           18,000
Direct labor	$                                       5,000	$                             4,000
Manufacturing overhead	$                                       8,169	$                             9,336
Total cost per batch	$                                     25,169	$                           31,336
Divided by: Number of units per batch	100	100
Cost per unit	$                                  251.690	$                        313.360
Cost per unit (rounded)	$                                     251.69	$                           313.36

Part 2

	Fabrication	Finishing
Overhead	$                                  120,000	$                           55,000
Divided by: total machine hours (10000+5000)	10,000	5,000
Overhead rate per machine hour	$                                       12.00	$                             11.00
Overhead applied to ZX300	Fabrication	Finishing	Total
Machine hours	500	200
Multiply: Overhead rate per machine hour	$                                       12.00	$                             11.00
Overhead applied	$                                       6,000	$                             2,200	$                  8,200
Overhead applied to SL500	Fabrication	Finishing	Total
Machine hours	700	100
Multiply: Overhead rate per machine hour	$                                       12.00	$                             11.00
Overhead applied	$                                       8,400	$                             1,100	$                  9,500
	ZX300	SL500
Direct materials	$                                     12,000	$                           18,000
Direct labor	$                                       5,000	$                             4,000
Manufacturing overhead	$                                       8,200	$                             9,500
Total cost per batch	$                                     25,200	$                           31,500
Divided by: Number of units per batch	100	100
Cost per unit	$                                  252.000	$                        315.000
Cost per unit (rounded)	$                                     252.00	$                           315.00

Part 3

Activity Centers	Fabrication	Finishing	Total Activity Costs
Maintenance	$                                     20,000	$                           10,000	$                30,000
Materials handling	$                                     30,000	$                           15,000	$                45,000
Machine setup	$                                     70,000	$                             5,000	$                75,000
Inspection activities	$                                              -	$                           25,000	$                25,000
Activity Centers	Fabrication	Finishing	Total Activity Level
Maintenance	10,000	5,000	15,000
Materials handling	3,000	1,500	4,500
Machine setup	700	50	750
Inspection activities		1,000	1,000
Activity Centers	Cost Drivers	Activity Costs	Divided by : Activity Level	Cost driver rate
Maintenance	Machine hours	$                           30,000	15,000	$                   2.00
Materials handling	Material moves	$                           45,000	4,500	$                 10.00
Machine setup	Machine setups	$                           75,000	750	$              100.00
Inspection activities	Inspection hours	$                           25,000	1,000	$                 25.00

Part 4

Model	Model ZX300
Activity Centers	Cost driver rate	Multiply: Activity	Allocated cost
Maintenance	$                                         2.00	700	$                  1,400
Materials handling	$                                       10.00	30	$                      300
Machine setup	$                                     100.00	5	$                      500
Inspection activities	$                                       25.00	30	$                      750
Model ZX300			$                  2,950
Model	Model SL500
Activity Centers	Cost driver rate	Multiply: Activity	Allocated cost
Maintenance	$                                         2.00	800	$                  1,600
Materials handling	$                                       10.00	50	$                      500
Machine setup	$                                     100.00	9	$                      900
Inspection activities	$                                       25.00	60	$                  1,500
Model SL500			$                  4,500
	ZX300	SL500
Total direct materials costs	$                                     12,000	$                           18,000
Total direct labor costs	$                                       5,000	$                             4,000
Overhead costs:
Maintenance	$                                       1,400	$                             1,600
Materials handling	$                                           300	$                                 500
Machine setup	$                                           500	$                                 900
Inspection activities	$                                           750	$                             1,500
Total costs	$                                     19,950	$                           26,500
Units produced	100	100
Unit cost	$                                     199.50	$                           265.00