3-763
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.
3-764
3-765
3-766
3-767
211.
Din, Inc., manufactures and sells two products: Product M5 and Product A9. 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 M5
500
7.0
3,500
Product A9
200
10.0
2,000
Total direct labor-
hours
5,500
The direct labor rate is $26.60 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product M5
$107.80
Product A9
$276.60
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
M5
Product
A9
Total
Labor-related
DLHs
$108,240
3,500
2,000
5,500
Machine setups
Setups
21,868
400
300
700
General factory
MHs
329,208
3,400
3,200
6,600
$459,316
3-768
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.
3-772
212.
Lystra Corporation manufactures two products, Product B and Product H. Product H is of
fairly recent origin, having been developed as an attempt to enter a market closely related
to that of Product B. Product H is the more complex of the two products, requiring two
hours of direct labor time per unit to manufacture compared to one hour of direct labor
time for Product B. Product H is produced on an automated production line.
Overhead is currently assigned to the products on the basis of direct-labor-hours. The
company estimated it would incur $450,000 in manufacturing overhead costs and produce
30,000 units of Product B and 7,500 units of Product H during the current year. Unit costs
for materials and direct labor are:
Product B
Product H
Direct material
$12
$25
Direct labor
$10
$20
Required:
a. Compute the predetermined overhead rate under the current costing method and
determine the unit product cost of each product for the current year.
b. The company’s overhead costs can be attributed to four major activities. These
activities and the amount of overhead cost attributable to each for the current year are
given below:
Expected Activity
Activity Cost Pools
Estimated Overhead Cost
Product B
Product H
Total
Machine setups required
$180,000
600
1,200
1,800
Purchase orders issued
38,382
500
100
600
Machine-hours required
92,650
6,800
10,200
17,000
Maintenance requests issued
138,968
693
907
1,600
3-773
$450,000
Using the data above and an activity-based costing approach, determine the unit product
cost of each product for the current year.
3-774
3-775
3-776
3-777
213.
Nakayama, Inc., manufactures and sells two products: Product Z1 and Product Q5. 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 Z1
700
7.0
4,900
Product Q5
100
4.0
400
Total direct labor-
hours
5,300
The direct labor rate is $24.20 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product Z1
$279.00
Product Q5
$251.00
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 Z1
Product Q5
Total
Labor-related
DLHs
$132,394
4,900
400
5,300
Product testing
Tests
17,318
400
300
700
General factory
MHs
81,522
3,000
3,300
6,300
$231,234
Required:
3-778
In all computations involving dollars in the following requirements, round off your answer
to the nearest whole cent.
a. Determine the unit product cost of each product under the company’s traditional
costing method.
b. Determine the unit product cost of each product under the activity-based costing
method.
3-779
3-780
3-781
3-782
214.
Overmeyer, Inc., manufactures and sells two products: Product M8 and Product L9. 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 M8
400
5.0
2,000
Product L9
800
4.0
3,200
Total direct labor-
hours
5,200
The direct labor rate is $21.70 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product M8
$213.20
Product L9
$145.40
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 M8
Product L9
Total
Labor-related
DLHs
$124,592
2,000
3,200
5,200
Machine setups
Setups
50,139
500
400
900
General factory
MHs
487,620
4,400
4,600
9,000
$662,351
Required: