221_Solutions_Chap_7_Fa_05 - E7-28 a. Overhead rate per...

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E7 - 28 a . Overhead rate per direct labor dollar: $82,200 ÷ $45,000 = 1.827 or 182.7% Gas Charcoal Cooker Smoker Direct materials $40,000 $100,000 Direct labor 20,000 25,000 Overhead (182.7% direct labor) 36,540 45,675 Total cost $96,540 $170,675 Units ÷ 1,000 ÷ 5,000 Unit cost $ 96.54 $ 34.135 b . Rate per unit of cost driver: Activity Cost Cost driver Rate Materials acquisition and inspection $30,000 $140,000 0.214/DM$ Materials movement 16,200 100 $162/move Scheduling 36,000 60 $600/batch Gas Charcoal Cooker Smoker Total direct materials costs $ 40,000 $ 100,000 Total direct labor costs 20,000 25,000 Overhead costs: Materials acquisition $40,000 & $100,000 @ 0.214/DM$ 8,560 21,400 Materials movement 80 & 20 @ $162/batch move 12,960 3,240 Scheduling 50 & 10 @ $600/batch 30,000 6,000 Total costs $111,520 $155,640
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Units produced ÷ 1,000 ÷ 5,000 Unit cost $ 111.52 $ 31.13 c . The solution to (b) using activity-based costing is more accurate. If the solution to (a) using traditional costing is followed, prices developed on the basis of costs will be inaccurate and result in lost profits and lost profit
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221_Solutions_Chap_7_Fa_05 - E7-28 a. Overhead rate per...

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