and Department 2 (labor intensive) with a rate of $1.20 per direct labor hour. The
consumption of these two drivers is as follows:
Department 1
Department 2
Machine Hours
Direct Labor Hours
Model
A
10,000
128,000
Model B
190,000
290,000
Compute the overhead cost per unit for each product by using departmental rates. (Round to
two decimal places.)
4.
CONCEPTUAL CONNECTION
Using the activity-based product costs as the standard, comment
on the ability of departmental rates to improve the accuracy of product costing. Did the
departmental rates do better than the plantwide rate?
1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor
hours. (Round to two decimal places.)
Plantwide rate:
$_________ per DLH
Model A:
$__________ overhead cost per unit
Model B:
$__________ overhead cost per unit
2. Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead
costs to two decimal places.)

Model A:
overhead cost per unit
Model B:
overhead cost per unit
Note
:
Be sure to complete both tables below.
Activity
Driver
Activity Rate
Setups
Production runs
per
hour
Inspections
Inspection hours
per
run
Machining
Machine hours
per
hour
Maintenance
Maintenance hours
per
run
$
$
$
$
$
$

Overhead assignment
Model A
Model B
Setups
Inspections
Machining
Maintenance
Total overhead
÷ Units produced
Overhead per unit
3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments:
Department 1: (machine intensive) with a rate of $3.90 per machine hour and Department 2: (labor
intensive) with a rate of $1.20 per direct labor hour. The consumption of these two drivers is as follows:
Department 1
Department 2
Machine Hours
Direct Labor Hours
Model
A
10,000
128,000
Model B
190,000
290,000
Compute the overhead cost per unit for each product by using departmental rates. (Round to two
decimal places.)
$
$
$
$
$
$

Model A:
per unit
Model B:
per unit
$
$

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- Winter '18
- Cost Accounting