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Munoz Electronics produces video games in three market categories: commercial, home, and miniature. Munoz has traditionally...

Munoz Electronics produces video games in three market categories: commercial, home, and miniature. Munoz has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers:

    

Category Total Pooled Cost Types of Costs Cost Driver
Unit $ 792,000 Indirect labor wages, supplies, factory utilities, machine maintenance Machine hours
Batch 412,800 Materials handling, inventory storage, labor for setups,packaging, labeling and shipping, scheduling Number of production orders
Product 211,100 Research and development Time spent by research department
Facility 493,000 Rent, general utilities, maintenance, facility depreciation, admin. salaries Square footage

     
Additional data for each of the product lines follow:     

Commercial Home Miniature Total
Direct materials cost $ 35.10 /unit $ 23.40 /unit $ 31.00 /unit
Direct labor cost $ 14.50 /hour $ 14.50 /hour $ 17.40 /hour
Number of labor hours 5,300 11,400 2,200 18,900
Number of machine hours 11,000 46,000 33,000 90,000
Number of production orders 220 1,900 680 2,800
Research and development time 11 % 18 % 71 % 100 %
Number of units 18,000 44,000 17,000 79,000
Square footage 19,000 54,000 12,000 85,000

    
Required

Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.

Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.

Type of Product Total Cost Cost per Unit
a. Commercial $ $
Home
Miniature
Combined total $4,635,200
b. Commercial
Home
Miniature
Combined total $0

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