Fremont Systems produces two different products, Product A, which sells for $1,000 per unit, and Product...

Fremont Systems produces two different products, Product A, which sells for $1,000 per unit, and Product B, which sells for $2,000 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows:

	Cost		Usage by Product A		Usage by Product B
Design (Engineering Hours)	$	1,500,000		400		600
Machining (Machine Hours)	$	5,000,000		2,000		6,000
Inspection (Batches)	$	300,000		90		30

Fremont manufactures 10,000 units of Product A and 7,500 units of Product B per month. Each unit of Product A uses $500 of direct materials and $200 of direct labor, while each unit of Product B uses $750 of direct materials and $350 of direct labor.

Required:

a. Calculate the activity rate for design.

b. Calculate the activity rate for machining.

c. Calculate the activity rate for inspection.

d. Determine the indirect costs assigned to product A.



e. Determine the indirect costs assigned to product B.

f. Determine the manufacturing cost per unit for product A. (Round your answer to 2 decimal places.)

g. Determine the manufacturing cost per unit for product B.

h. Determine the gross profit per unit for product A. (Round your intermediate calculation to 2 decimal places. Round your answer to 2 decimal places.)

i. Determine the gross profit per unit for product B.

Expert Solution

		i	ii	iii	iv=ii+iii	v=i/iv
			Usage
		Cost	Product A	Product B	Total	Rate
	Design (Engineering Hours)	1,500,000	400	600	1000	1500
	Machining (Machine Hours)	5,000,000	2,000	6,000	8000	625
	Inspection (Batches)	300,000	90	30	120	2500


Ans : a. Calculate the activity rate for design.				1500	per engineering hr
ans b. Calculate the activity rate for machining.				625	per machine hr
ans c. Calculate the activity rate for inspection.				2500	per batches


d. Determine the indirect costs assigned to product A.
		Product A	Rate	Indirect cost
	Design	400	1500	600,000
	Machining	2000	625	1,250,000
	Inspection	90	2500	225,000
				2,075,000

	Ans =			2,075,000

e. Determine the indirect costs assigned to product B.
		Product B	Rate	Indirect cost
	Design	600	1500	900,000
	Machining	6000	625	3,750,000
	Inspection	30	2500	75,000
				4,725,000

	Ans =			4,725,000

f. Determine the manufacturing cost per unit for product A

	Material			500
	Labor			200
	overhead	2075000/10000		207.50
				907.5

	Ans =			907.50

g. Determine the manufacturing cost per unit for product B.
	Material			750.00
	Labor			350.00
	overhead	4725000/7500		630.00
				1,730.00

	Ans =			1,730.00

h. Determine the gross profit per unit for product A.

	Sales price =			1,000.00
	Unit cost =			907.50
	Gross profit =			92.50

i. Determine the gross profit per unit for product B.

	Sales price =			2,000.00
	Unit cost =			1,730.00
	Gross profit =			270.00

ekkarill92 answered 1 year ago

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