Reference no: EM133067825

Question - A manufacturing company produces two product lines: sweatshirts and T-shirts. The company currently uses a plant-wide overhead rate using machine hours to allocate overhead. At the beginning of the year, the company made the following estimates:

During the year, the company expected to produce 10,000 sweatshirts and 55,000 t-shirts. The expected manufacturing overhead cost for the year is $525,000.

Required -

1) Compute the plant wide overhead rate using the current costing method (machine hours).

2) Calculate the unit product costs for these two products under the current costing system (machine hours).

3) Management is considering implementing activity-based costing. Half of manufacturing overhead would be allocated based on machine hours, and the remainder would be allocated based on design hours. The company expects design hours to be 1,000 hours for sweatshirts and 4,000 hours for t-shirts. A greater amount of design hours is needed for t-shirts as the company has a wider selection of t-shirt designs given the volume of sales. Round calculations to two decimal places.