3-461
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?
3-466
210. Mahaxay, Inc., manufactures and sells two products: Product P0 and Product L5. 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 P0 700 6.0 4,200
Product L5 200 3.0 600
Total direct labor-hours 4,800
The direct labor rate is $16.90 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials Cost per Unit
Product P0 $107.20
Product L5 $119.20
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 P0
Product L5
Total
Labor-related DLHs $194,736 4,200 600 4,800
Product testing Tests 114,647 600 700 1,300
General factory MHs 182,505 3,400 3,500 6,900
$491,888
3-467
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.
3-471
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
3-472
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.
3-476
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
$450,000
3-480
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