3-723
3-724
3-725
203.
Dameron, Inc., manufactures and sells two products: Product J5 and Product E7. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product J5
400
9.0
3,600
Product E7
900
11.0
9,900
Total direct labor-
hours
13,500
The direct labor rate is $15.90 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost
per Unit
Product J5
$220.10
Product E7
$125.10
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Estimated
Expected Activity
Activity Cost Pools
Activity Measures
Overhead Cost
Product J5
Product E7
Total
Labor-related
DLHs
$308,340
3,600
9,900
13,500
Product testing
Tests
54,144
300
500
800
General factory
MHs
403,956
3,300
3,000
6,300
$766,440
Required:
3-726
In all computations involving dollars in the following requirements, round off your answer
to the nearest whole cent.
a. Compute the activity rates under the activity-based costing system.
b. Determine how much overhead would be assigned to each product under the activity-
based costing system.
c. Determine the unit product cost of each product under the activity-based costing
method.
Computation of activity rates:
3-728
3-729
204.
Parody, Inc., manufactures and sells two products: Product W5 and Product V5. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product W5
900
7.0
6,300
Product V5
500
9.0
4,500
Total direct labor-
hours
10,800
The direct labor rate is $16.30 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost
per Unit
Product W5
$231.60
Product V5
$132.80
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Estimated
Expected Activity
Activity Cost Pools
Activity Measures
Overhead Cost
Product W5
Product V5
Total
Labor-related
DLHs
$326,916
6,300
4,500
10,800
Production orders
Orders
21,820
400
600
1,000
General factory
MHs
830,180
5,000
5,300
10,300
$1,178,916
3-730
Required:
In all computations involving dollars in the following requirements, round off your answer
to the nearest whole cent.
a. The company currently uses a traditional costing method in which overhead is applied
to products based solely on direct labor-hours. Compute the company’s predetermined
overhead rate under this costing method.
b. How much overhead would be applied to each product under the company’s traditional
costing method?
c. Determine the unit product cost of each product under the company’s traditional
costing method.
d. Compute the activity rates under the activity-based costing system.
e. Determine how much overhead would be assigned to each product under the activity-
based costing system.
f. Determine the unit product cost of each product under the activity-based costing
method.
(a)
(b)
3-734
3-735
205.
Ermitanio, Inc., manufactures and sells two products: Product U8 and Product U1. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product U8
900
9.0
8,100
Product U1
300
6.0
1,800
Total direct labor-
hours
9,900
The direct labor rate is $18.50 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product U8
$260.60
Product U1
$107.30
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Estimated
Expected Activity
Activity Cost Pools
Activity Measures
Overhead Cost
Product U8
Product U1
Total
Labor-related
DLHs
$298,782
8,100
1,800
9,900
Product testing
Tests
58,387
400
300
700
General factory
MHs
339,008
3,300
3,100
6,400
$696,177
3-736
Required:
In all computations involving dollars in the following requirements, round off your answer
to the nearest whole cent.
a. The company currently uses a traditional costing method in which overhead is applied
to products based solely on direct labor-hours. Compute the company’s predetermined
overhead rate under this costing method.
b. How much overhead would be applied to each product under the company’s traditional
costing method?
c. Determine the unit product cost of each product under the company’s traditional
costing method.
d. Compute the activity rates under the activity-based costing system.
e. Determine how much overhead would be assigned to each product under the activity-
based costing system.
f. Determine the unit product cost of each product under the activity-based costing
method.
g. What is the difference between the overhead per unit under the traditional costing
method and the activity-based costing system for each of the two products?
h. What is the difference between the unit product costs under the under the traditional
costing method and the activity-based costing system for each of the two products
3-737
3-741
3-742
206.
Neldon, Inc., manufactures and sells two products: Product S3 and Product K2. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product S3
800
8.0
6,400
Product K2
900
6.0
5,400
Total direct labor-
hours
11,800
The direct labor rate is $18.00 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product S3
$280.70
Product K2
$157.90
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Estimated
Estimated
Activity Cost Pools
Activity Measures
Overhead Cost
Product S3
Product K2
Total
Labor-related
DLHs
$523,094
6,400
5,400
11,800
Machine setups
Setups
135,478
600
800
1,400
General factory
MHs
392,327
5,000
5,300
10,300
$1,050,899