Reference no: EM132548258
CORA Company manufactures and sells three styles of outdoor chairs: Black Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of black, chrome and white chairs, respectively. The following additional data apply:
BLACK CHROME WHITE
Projected sales in units 30,000 50,000 40,000
PER UNIT data:
Selling price $40 $20 $30
Direct materials $ 8 $ 4 $ 8
Direct labor $15 $ 3 $ 9
Overhead cost based on direct labor hours (Traditional system)
Hours per 1000-unit batch:
Direct labor hours 40 10 30
Machine hours 25 25 10
Setup hours 1.0 0.5 1.0
Inspection hours 30 20 20
Total overhead costs and per activity are estimated as follows:
Activity Overhead costs Allocation base
Setups $465,500 Number of setup hours
Inspections $405,000 Number of inspection hours
$870,500
Required:
Question a. Using the traditional system where overhead cost are allocated using Direct labor hours as the allocation base, determine the Allocation rate and calculate the cost per unit and the gross profit per unit for the three style of chairs
Question b. Using ABC determine:
1. The activity-cost-driver rate for setup costs and inspection cost
2. Compute the estimated cost per unit for the three style of chair
3. Calculate the estimated gross profit per unit for the three style of chairs