Cabat Company manufactures two products, Product C and Product D. The company es
ID: 2492229 • Letter: C
Question
Cabat Company manufactures two products, Product C and Product D. The company estimated it would incur $186,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period’s operations appear below: Product C Product D Estimated volume 4,250 units 3,450 units Direct labor-hours per unit 2.10 hours 1.70 hour Direct materials cost per unit $ 16.10 $ 29.10 Direct labor cost per unit $ 14.40 $ 10.80 Requried: a-1. Compute the predetermined overhead rate under the current method. (Round your answer to 2 decimal places.) a-2. Determine the unit product cost of each product for the current year. (Do not round your intermediate calculations. Round your final answer to 2 decimal places.) b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below: Activity Cost Pools Estimated Overhead Costs Expected Activity Product C Product D Total Machine setups $ 13,090 200 210 410 Purchase orders 77,940 1,000 1,340 2,340 General factory 95,880 8,925 5,865 14,790 Total $ 186,910 Determine the unit product cost of each product for the current period using the activity-based costing approach. (Round your intermediate calculations and final answers to 2 decimal places.)
Explanation / Answer
a-1) Total Direct Labor Hours = (4,250 units*2.10 hrs per unit)+(3,450 units*1.70 hrs per unit)
= 8,925 hrs+5,865 hrs = 14,790 hrs
Predetermined Overhead Rate = Total Manufacturing Overhead/Total Direct Labor Hours
= $186,910/14,790 hrs = $12.64 per hour
a-2) Calculation of unit product cost (Amounts in $)
b) Calculation of Manufacturing Overhead Allocated (Amounts in $)
Calculation of unit product cost (Amounts in $)
Particulars Product C Product D Direct Materials cost per unit 16.10 29.10 Direct Labor cost per unit 14.40 10.80 Manufacturing Overhead cost per unit (2.10 hrs*$12.64 per hr) = 26.54 (1.70 hrs*$12.64 per hr) = 21.49 Unit Product Cost 57.04 61.39