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ch04 - CHAPTER 4PROBLEMS: SET B P4-1B VideoPlus, Inc....

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CHAPTER 4—PROBLEMS: SET BP4-1BVideoPlus, Inc. manufactures two types of DVD players, a deluxe model and astandard model. The deluxe model is a multi-format progressive-scan DVD player withnetworkingcapability, Dolby digital, and DTS decoder. The standard model’s primary fea-ture is progressive-scan. Annual production is 50,000 units for the deluxe and 20,000 unitsfor the standard.Both products require two hours of direct labor for completion. Therefore, total annualdirect labor hours are 140,000 [2 hrs.3(20,000150,000)]. Expected annual manufactur-ing overhead is $1,050,000. Thus, the predetermined overhead rate is $7.50 ($1,050,000140,000) per direct labor hour. The direct materials cost per unit is $42 for the deluxemodel and $11 for the standard model. The direct labor cost is $18 per unit for both thedeluxe and the standard models.The company’s managers identified six activity cost pools and related cost drivers andaccumulated overhead by cost pool as follows.Assign overhead usingtraditional costing and ABC;compute unit costs; classifyactivities as value- or non–value-added.(LO 1, 4, 6),APExpectedUse ofExpected Use ofEstimatedCostDrivers by ProductActivity Cost PoolCost DriverOverheadDriversStandardDeluxePurchasingOrders$126,000400100ReceivingPounds30,00020,0004,00016,000AssemblingNumber of parts444,00074,00020,00054,000TestingNumber of tests115,00023,00010,00013,000FinishingUnits140,00070,00020,00050,000Packing and shipping Pounds195,00080,00018,00062,000$1,050,000Instructions(a) Under traditional product costing, compute the total unit cost of both products.Prepare a simple comparative schedule of the individual costs by product (similar toIllustration 4-10).(b) Under ABC, prepare a schedule showing the computations of the activity-based over-head rates (per cost driver).(c) Prepare a schedule assigning each activity’s overhead cost pool to each product basedon the use of cost drivers. (Include a computation of overhead cost per unit, roundingto the nearest cent.)(d) Compute the total cost per unit for each product under ABC.(e) Classify each of the activities as a value-added activity or a non–value-added activity.(f) Comment on (1) the comparative overhead cost per unit for the two products underABC, and (2) the comparative total costs per unit under traditional costing and ABC.4300P4-2BKinnard Electronics manufactures two home theater systems: the Elite which sellsfor $1,400, and a new model, the Preferred, which sells for $1,100. The production costcomputed per unit under traditional costing for each model in 2014 was as follows.Traditional CostingElitePreferredDirect materials$600$320Direct labor ($20 per hour)100Manufacturing overhead ($35 per DLH)175140Total per unit cost$875$540In 2014, Kinnard manufactured 20,000 units of the Elite and 10,000 units of the Pre-ferred. The overhead rate of $35 per direct labor hour was determined by dividing totalexpected manufacturing overhead of $4,900,000 by the total direct labor hours (140,000)for the two models.80

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Term
Spring
Professor
Thanh
Tags
Business

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