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Cassidy Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, VIP and Kommander, about which it has provided the following data: VIP Kommander Direct materials per unit $ 27.50 $ 62.10 Direct labor per unit $ 15.60 $ 52.00 Direct labor-hours per unit 0.60 2.00 Annual production 40,000 15,000 The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's estimated total direct labor-hours for the year is 54,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Activities and Activity Measures Estimated Overhead Cost Assembling products (DLHs) $ 918,000 Preparing batches (batches) 397,440 Product support (product variations) 1,134,000 Total $ 2,449,440 Expected Activity VIP Kommander Total DLHs 24,000 30,000 54,000 Batches 1,458 1,026 2,484 Product variations 2,592 1,188 3,780 Unit overhead cost of Product Short under the activity-based costing system is closest to:

a. $204.82.
b. $68.70.
c. $182.80.
d. $114.10.

Respuesta :

Total DLHs 24,000 30,000 54,000 Batches 1,458 1,026 2,484 Product variations 2,592 1,188 3,780 Unit overhead cost of Product Short under the activity-based costing system is closest to:

b. $68.70.

Explanation:

  • Activity Measures Estimated Overhead Cost Assembling products (DLHs) $ 918,000 Preparing batches (batches) 397,440 Product support (product variations) 1,134,000 Total $ 2,449,440 Expected Activity VIP Kommander Total DLHs 24,000 30,000 54,000 Batches 1,458 1,026 2,484 Product variations 2,592 1,188 3,780 Unit overhead cost of Product Short under the activity-based costing system is closest to:
  • b. $68.70.
  • Assembling products = $ 918,000
  • Company's estimated total direct labor-hours for the year is 54,000.
  • Therefore, [tex]\frac{918,000}{54,000.}[/tex]× 3000= 510,000
  • Preparing batches (batches) = 397,440
  • Therefore, [tex]\frac{397,440}{2484}[/tex]×1026= 164160
  • Product support (product variations) = 1,134,000
  • Therefore, [tex]\frac{ 1,134,000}{3780}[/tex]× 1188 = 356400
  • Total overhead costs = 1030560
  • Unit overhead cost = [tex]\frac{total overhead costs}{ number of units}[/tex]  = [tex]\frac{1030560}{15000}[/tex] = 68.70

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