Question

Required information Problem 4-17 Contrast Activity Based Costing and Conventional Product Costing (L04-2, L04-3, L04-4) (The following information applies to the questions displayed below) 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 Direet tar Hours per unit Model 0 L al production Lab our 3,000 wita 12,000 units Additional information about the company follows: a. Model N BOO XL requires $75 in direct materials per unit, and Model N 500 requires $25. b. The direct labor wage rate is 18 per hour c. The company has always used direct labor hours as the base for applying manufacturing overhead cost to products d. Model N BOO XL is more complex to manufacture than Model N SOO and requires the use of special equipment Consequently, the company is considering the use of activity based costing to assignmanufacturing overhead cost to products. Three activity cost pools have been identified as follows: activity coat pool Overhead coat Activity Measure ots Direct Labor- General factory 1.260 Problem 4-17 Part 1 Required: LAssume that the company continues to use direct labor hours as the base for applying overhead cost to products Comote the predetermined overhead rate Compute the product cost of each model MacBook Air 20.

Answer 1

1a) Predetermine overhead rate = Estimated overhead/estimated labor hour = 1785000/21000 = 85 per labor hour

1b) Unit product cost

	Model N 800 XL	Model N 500
Direct material	75	25
Direct labor	18*3 = 54	18
Overhead	85*3 = 255	85
Unit product cost	384	128