Reference no: EM13577347

Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

	Direct Labor- Hours per Unit	Annual Production	Total Direct Labor-Hours
Model N 800 XL	1.8	4,500 units	8,100
Model N 500	0.9	29,000 units	26,100
			34,200

Additional information about the company follows:

a.	Model N 800 XL requires $71 in direct materials per unit, and Model N 500 requires $56.
b.	The direct labor wage rate is $12 per hour.
c.	The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.
d.	Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Machine setups	Number of setups	$	358,000
Special processing	Machine-hours		175,000
General factory	Direct labor-hours		1,268,000
		$	1,801,000

	Expected Activity
Activity Measure	Model N 800 XL	Model N 500	Total
Number of setups	50	100	150
Machine-hours	12,000	0	12,000
Direct labor-hours	8,100	26,100	34,200

1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.(Do not round intermediate calculations.Round your answers to 2 decimal places.)

a.	Compute the predetermined overhead rate.

Predetermined overhead rate

$ per DLH

b.	Compute the unit product cost of each model.

Model N 800 XL	$
Model N 500	$

2. Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products.

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Machine setup	$	per setup
Special processing	$	per MH
General factory	$	per DLH

Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Model N 800 XL	Model N 500
Overhead cost per unit	$	$

b.Compute the unit product cost of each model. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Model N 800 XL	Model N 500
Unit product cost	$	$