Reference no: EM132960193

ComTech, Inc. manufactures 2 types of minicomputers - CT100 and CT200, and applies overhead costs on the basis of direct labour hours. The anticipated overhead is $710,000.

Information about the company's products follows.

                                                              CT100               CT200

Estimated production volume         2,500                 3,125

Direct material per unit                   $30                   $45

Direct labor per unit ($15/hr)           $45                   $60

Applied overhead ?

ComTech's overhead of $710,000 can be identified with 3 major activities: order processing ($120,000), machine processing ($500,000), and product inspection ($90,000). These activities are driven by the number of orders processed, machine hours worked, and inspection hours, respectively.

Data relevant to these activities follows.

                                                       CT100                 CT200

Orders processed                           ?                    ?

Machine hours worked per unit     9.20                 8.64

Inspection hours                         4,000                11,000

While the number of orders processed is not known, management has informed you that it costs around $200 to process an order and the ratios of orders processed for CT100 and CT200 are (7/12) and (5/12) respectively. Management is very concerned about declining profitability despite a healthy increase in sales volume.

Required:

Problem 1. Assuming use of direct labour hours to apply overhead to production, compute the unit manufacturing costs of the CT100 and CT200 products if the expected manufacturing volume is attained.

Problem 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the CT100 and CT200 products if the expected manufacturing volume is attained.