Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It...

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 70,000 units of EX300 and 13,500 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

	EX300		TX500		Total
Direct materials	$	376,325	$	172,550	$	548,875
Direct labor	$	130,000	$	47,500	$	177,500

The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below:

			Activity
Activity Cost Pool (and Activity Measure)	Manufacturing Overhead		EX300		TX500		Total
Machining (machine-hours)	$	175,875		100,000		67,500		167,500
Setups (setup hours)		262,500		125		400		525
Product-level (number of products)		202,400		1		1		2
General factory (direct labor dollars)		86,975	$	130,000	$	47,500	$	177,500
Total manufacturing overhead cost	$	727,750

Required:

1-a. Compute the plantwide overhead rate that would be used in the company’s conventional cost system.

1-b. Using the plantwide rate, compute the unit product cost for each product.

2-a. Compute the activity rate for each activity cost pool.

2-b. Using the activity rates, compute the unit product cost for each product.

Solutions

Expert Solution

Oh rate as per DLH:
Total expected overheads	7,27,750
Divide: Total DLC		1,77,500
OH rate as % of DLC		410%

OH allocated
			EX300	TX 500
DLC			1,30,000	47,500
Multiply: Oh rate		410%	410%
Oh allocated		533000	1,94,750

Total cost per unit
			EX300	TX 500
DMC			3,76,325	1,72,550
DLC			1,30,000	47,500
Oh allocated		533000	1,94,750
Total cost			10,39,325	4,14,800
Divide: Units		70,000	13,500
Cost per unit		14.85	30.73


ABC:
Activity rate
Actvity		OH	Drivers	Rate
Mchining		175875	167500	1.05
Setups		262500	525	500
Product Level	202400	2	1,01,200
General factory	86975	177500	49.00%

OH allocated
Activity		Rate	EX 300	TX 500
			Driver	OH cost	Driver	OH cost
Mchining		1.05	100000	1,05,000	67500	70,875
Setups		500	125	62,500	400	2,00,000
Product Level	101200	1	1,01,200	1	1,01,200
General factory	49%	130000	63,700	47500	23,275
		Total Overheads	332400		395350

Total cost per unit
			EX300	TX 500
DMC			3,76,325	1,72,550
DLC			1,30,000	47,500
Oh allocated		332400	3,95,350
Total cost			8,38,725	6,15,400
Divide: Units		70,000	13,500
Cost per unit		11.98	45.59

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It...

Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: EX300 TX500 Total Direct materials $ 366,325 $ 162,550 $ 528,875 Direct labor $ 120,000 $ 42,500 $...

Sandstorm Manufacturing Inc. makes two types of industrial component parts—the LE100 and the UL600. It annually...

Sandstorm Manufacturing Inc. makes two types of industrial component parts—the LE100 and the UL600. It annually produces 58,000 units of LE100 and 12,300 units of UL600.The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: LE100 UL600 Total Direct materials $ 364,325 $ 160,550 $ 524,875 Direct labor $ 118,000 $ 41,500 $ 159,500 ...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,770,300 Cost of goods sold 1,234,258 Gross margin 536,042 Selling and administrative expenses 590,000 Net operating loss $ (53,958 ) Hi-Tek produced and sold 60,300 units of B300 at a price of $21 per unit and 12,600 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,704,000 Cost of goods sold 1,222,415 Gross margin 481,585 Selling and administrative expenses 590,000 Net operating loss $ (108,415 ) Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,776,400 Cost of goods sold 1,233,700 Gross margin 542,700 Selling and administrative expenses 550,000 Net operating loss $ (7,300 ) Hi-Tek produced and sold 60,400 units of B300 at a price of $21 per unit and 12,700 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,645,900 Cost of goods sold 1,225,174 Gross margin 420,726 Selling and administrative expenses 590,000 Net operating loss $ (169,274 ) Hi-Tek produced and sold 60,100 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,691,400 Cost of goods sold 1,219,910 Gross margin 471,490 Selling and administrative expenses 570,000 Net operating loss $ (98,510 ) Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,702,000 Cost of goods sold 1,218,323 Gross margin 483,677 Selling and administrative expenses 590,000 Net operating loss $ (106,323 ) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,699,400 Cost of goods sold 1,245,844 Gross margin 453,556 Selling and administrative expenses 640,000 Net operating loss $ (186,444 ) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 per unit....

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption...

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,695,400 Cost of goods sold 1,234,000 Gross margin 461,400 Selling and administrative expenses 640,000 Net operating loss $ (178,600 ) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 per unit....

Subjects