Question

Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:

	Deluxe	Regular
Quantity	100,000	800,000
Selling price	$900	$750
Unit prime cost	$529	$483

In addition, the following information was provided so that overhead costs could be assigned to each product:

Activity Name	Activity Driver	Deluxe	Regular	Activity Cost
Setups	Number of setups	300	200	$2,000,000
Machining	Machine hours	100,000	300,000	80,000,000
Engineering	Engineering hours	50,000	100,000	6,000,000
Packing	Packing orders	100,000	400,000	100,000

Required:

1. Calculate the overhead rates for each activity. (Round to two decimal places.)

Setups	$ per setup
Machining	$ per machine hour
Engineering	$ per engineering hour
Packing	$ per packing order

2. Calculate the per-unit product cost for each product. (Round to the nearest dollar.)

Deluxe	$per unit
Regular	$per unit

Answer 1

• All working forms part of the answer
• Requirement 1

Working

Activity Name	Activity Driver	Activity Cost	Deluxe	Regular	TOTAL	Overhead rates
Setups	Number of setups	$ 2,000,000.00	300	200	500	$        4,000.00
Machining	Machine hours	$ 80,000,000.00	100,000	300,000	400,000	$            200.00
Engineering	Engineering hours	$ 6,000,000.00	50,000	100,000	150,000	$              40.00
Packing	Packing orders	$     100,000.00	100,000	400,000	500,000	$                 0.20

Answer

Setups	$             4,000.00	per setup
Machining	$                 200.00	per machine hour
Engineering	$                   40.00	per engineering hour
Packing	$                     0.20	per packing order

• Requirement 2

Working For Deluxe

Deluxe
	Activity Rates		No of cost drivers	Amount Allocated
Setups	$             4,000.00	per setup	300	$    1,200,000.00
Machining	$                 200.00	per machine hour	100,000	$ 20,000,000.00
Engineering	$                   40.00	per engineering hour	50,000	$    2,000,000.00
Packing	$                     0.20	per packing order	100,000	$          20,000.00
Total Overhead cost allocated				$ 23,220,000.00
Quantity				100000
Overhead cost per unit				$                232.20
Prime Cost per unit				$                529.00
Per unit Product Cost				$                761.20 Answer

Working For Regular

Regular
	Activity Rates		No of cost drivers	Amount Allocated
Setups	$           4,000.00	per setup	200	$          800,000.00
Machining	$              200.00	per machine hour	300,000	$    60,000,000.00
Engineering	$                 40.00	per engineering hour	100,000	$      4,000,000.00
Packing	$                   0.20	per packing order	400,000	$            80,000.00
Total Overhead cost allocated				$    64,880,000.00
Quantity				800000
Overhead cost per unit				$                     81.10
Prime Cost per unit				$                  483.00
Per unit Product Cost				$                  564.10 Answer

----Answer

Deluxe	$               761	per unit
Regular	$               564	per unit