Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1,

Question

Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2

The following data are for the two products produced by Tadros Company.

The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

Required:

(Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.)

Product A Product B Direct materials $ 14 per unit $ 27 per unit Direct labor hours 0.5 DLH per unit 1.5 DLH per unit Machine hours 0.4 MH per unit 1.1 MH per unit Batches 105 batches 210 batches Volume 10,000 units 2,000 units Engineering modifications 9 modifications 45 modifications Number of customers 500 customers 400 customers Market price $ 35 per unit $ 95 per unit per unit

Explanation / Answer

1) Direct Labor hours for product A = 10,000 units*0.5 DLH per unit = 5,000 hrs

Direct Labor hours for product B = 2,000 units*1.5 DLH per unit = 3,000 hrs

Overhead costs = Engineering support+Electricity+Setup costs

= $26,000+$24,800+$40,000 = $90,800

1.2)

2.1)

2.2)

3.1)

3.2)

Calculation of manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. Overhead costs (A) $90,800 (A/B) $11.35 per direct labor hour Direct Labor Hours (B) 8,000 hrs Overhead Assigned Activity Driver (C) Plantwide OH rate (D) Total Overhead Cost (E = C*D) Units Produced (F) OH Cost per unit (E/F) Product A 5,000 $11.35 $56,750 10,000 $5.67 Product B 3,000 $11.35 $34,050 2,000 $17.03 Total manufacturing cost per unit Product A Product B Direct Material cost per unit $14 $27 Direct Labor cost per unit (0.50*$20) = $10 (1.50*$20) = $30 Overhead cost per unit $5.67 $17.03 Total manufacturing cost per unit $29.67 $74.03

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