Reference no: EM132805800

Flyer Corporation manufactures two products, Product A and Product B. Product B is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product A. Product B is the more complex of the two products, requiring three hours of direct labor time per unit to manufacture compared to one and one-half hours of direct labor time for Product A. Product B is produced on an automated production line.

Overhead is currently assigned to the products on the basis of direct-labor hours. The company estimated it would incur P396,000 in manufacturing overhead costs and produce 5,500 units of Product B and 22,000 units of Product A during the current year.

Unit costs for materials and direct labor are:

                                              Product A              Product B
Direct material ......              P9                      P20
Direct labor .........             P7                         P15

Required:

Problem 1. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year.