2010-03-22_081114_pribum-1 - Koszyk Manufacturing...

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Koszyk 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, P85G and C43S, about which it has provided the following data: P85G C43S Direct materials per unit $36.50 $63.10 Direct labor per unit $20.80 $31.20 Direct labor-hours per unit 0.80 1.20 Annual production 35,000 10,000 The company’s estimated total manufacturing overhead for the year is $2,264,000 and the company’s estimated total direct labor-hours for the year is 40,000. 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 Supporting direct labor (DLHs) $1,160,000 Setting up machines (setups) 288,000 Parts administration (part types) 816,000 Total $2,264,000 Expected Activity P85G C43S Total DLHs 28,000 12,000 40,000 Setups 1,480 920 2,400 Part types 1,880 840 2,720 1. The manufacturing overhead that would be applied to a unit of product P85G under the company's traditional costing system is closest to: A) $89.67 B) $45.28 C) $44.39 D) $23.20 E) None of the above 2. The manufacturing overhead that would be applied to a unit of product C43S under the activity-based costing system is closest to: A) $71.04 B) $138.96 C) $67.92 D) $11.04 E) None of the above Use the following to answer questions 3-6: Addison Company has two products: A and B. Annual production and sales are 800 units of Product A and 700 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.2 direct labor hours per unit and Product B requires 0.6 direct labor hours per unit. The total estimated overhead for next period is $71,286. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools— Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows: Expected Activity Activity Cost Pool Estimated Overhead Costs Product A Product B Total Activity 1 $20,272 300 500 800 Activity 2 29,380 800 500 1,300 General Factory 21,634 160 420 580 Total $71,286 (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.) 3. The predetermined overhead rate under the traditional costing system is closest to: A) $25.34 B) $22.60 C) $37.30 D) $122.91 E) None of the above 4. The overhead cost per unit of Product B under the traditional costing system is closest to: A) $22.38 B) $13.56 C) $73.74 D) $15.20 E) None of the above 5. The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity- based costing system is closest to: A) $22.60 B) $54.84 C) $58.76 D) $36.73 E) None of the above
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6. The overhead cost per unit of Product B under the activity-based costing system is
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2010-03-22_081114_pribum-1 - Koszyk Manufacturing...

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