Reference no: EM13299967

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 5,200 units 9,360
Model N 500 0.9 30,500 units 27,450

36,810


Additional information about the company follows:

a.
Model N 800 XL requires $72 in direct materials per unit, and Model N 500 requires $46.
b. The direct labor wage rate is $11 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 $ 354,000
Special processing Machine-hours 176,000
General factory Direct labor-hours 1,268,000

$ 1,798,000



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 9,360 27,450 36,810
2-16-2011


1.value:
7.00 points

Required:
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 $
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2.value:
8.00 points

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

a(1)
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

a(2)
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 $ $
6-2011
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