Question

Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced DIH) Direct labor cost (@ $31 per DLH) Direct materials cost Product A 13,500 units 0.14 DLH per unit $ 1.80 per unit Product B 1,300 units 0.28 DLH per unit $ 2.30 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $ 73,204 61,000 59,640 $193,844

Answer 1

Answer with working notes is given below

Volume Direct labor hours per unit Total DL hours Product 13,500 0.14 1,890 Product B 1,300 0.28 364 2,254 Total Overheads- Manufacturing Total DL hours Direct labor hour rate $193,844 2,254 $86.00 Manufacturing overhead rate per unit based on plant wise overhead rate Total Activity Plant wise Overheads assigned Overhead Driver OH rate Cost Product A labor hour $86.00 162,540.00 Product B labor hour $86.00 31,304.00 Units produced OH Cost per unit 13,500 1,300 $12.04 $24.08 Cost per unit Direct Material per unit Direct labor per unit Overheads per unit Total Manufacturing Cost per Unit Product A $1.80 $4.34 $12.04 $18.18 Product B $2.30 $8.68 (Labours hours per unit x $31) $24.08 $35.06 2 Gross profit per unit Market price Cost Gross profit per unit Product A $23.30 $18.18 $5.12 Product B $58.00 $35.06 $22.94 Total Activities Number of set ups required for production Number of parts required Inspection hours required Product A setups parts/unit hours Product B 24 setups 9 parts/unit 230 hours 146,700 (Units X parts per unit) 284 Manufacturing cost per unit using ABC Costing Activity rate $73,204 2,711.26 Per set up 27 Machine setup Total machine set up cost Total setups Materials handling Total Material handling cost Total parts Quality Control Total Quality control cost Total inspection hours $61,000 146,700 0.42 per part $59,640 284 210.00 per inspection hour Activity Driver Overhead Assigned Total Overhead Activity Rate Cost 3 setups 10 parts/unit 54 hours $2,711.26 per set up $0.42 per part/unit $210.00 per hour $8,134 $56,135 (13,500*10*$0.42) $11,340 $75,609 A 13,500 B $5.60 A/B Product A Machine Setup Material handling Quality control Total Overheads assigned Output produced Overhead cost per unit Product B Machine Setup Material handling Quality control Total Overheads assigned Output produced Overhead cost per unit 24 setups 9 parts/unit 230 hours $2,711.26 per set up $0.42 per part/unit $210.00 per hour $65,070 $4,865 (1,300*9*$0.42) $48,300 $118,235 A 1,300 B $90.95 A/B Cost per unit Direct Material per unit Direct labor per unit Overheads per unit | Total Manufacturing Cost per Unit Product A $1.80 $4.34 $5.60 $11.74 Product B $2.30 $8.68 (Labours hours per unit X $31) $90.95 $101.93 Gross profit per unit Market price Cost Gross profit per unit Product A $23.30 $11.74 $11.56 Product B $58.00 $101.93 $43.93 4.2 Yes Reason being product B is generating negative gross profit as per ABC method