Question

Accurso, Inc., manufactures and sells two products: Product Blue and Product Red. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: PRODUCTION (# of units) DL HOURS PER UNIT TOTAL DIRECT LABOR HOURS Product Blue 3,600 Product Red 2,700 TOTAL 6,300 The direct labor rate is $20.00 per DLH. The direct materials cost per unit for each product is given below: 600 900 6 3 1,500 Product Blue Product Red Direct Materials Cost per Unit $90.00 $120.00 Other details related to cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Activity Measures Overhead Cost Product Blue Product Red Total Pools Labor-related DLHs 80,000 3,600 2,700 6,300 Machine setups setups 32,000 300 800 1.100 General factory MHS 268,000 4,700 4,500 9,200 380,000 1. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. 2. How much total overhead PER UNIT would be applied to Product Blue under the company's traditional costing method? 3. How much total overhead PER UNIT would be applied to Product Red under the company's traditional costing method? 4. Determine the total product cost PER UNIT for Product Blue under the company's traditional costing method 5. Determine the total product cost PER UNIT for Product Red under the company's traditional costing method 6. Determine how much total overhead PER UNIT would be assigned to Product Blue under the activity

Answer 1

Q
	Traditional Costing
				Product Blue	Product Red	Total
	Total Direct Labour Hours			3,600	2,700	6,300
	Direct Labour Rate / Hour					20
	Total Overheads					380,000
1	Overhead Rate / Hour					60.32
	Direct Labour Hours per unit			6	3
2 & 3	Overhead Rate / Unit			361.90	180.95
	Total Product Cost per unit
	Direct Material			90.00	120.00
	Direct Labour			120.00	60.00
	Overheads			361.90	180.95
4 & 5	Total			571.90	360.95
	Activity Based Costing
				Product Blue	Product Red	Total
	Production Units			600	900	1,500
	Total Direct Labour Hours			3,600	2,700	6,300
	Machine Set up			300	800	1,100
	General Factory			4,700	4,500	9,200
	Overheads
	Labour Related	DLH	80,000	45,714	34,286	80,000
	Machine Set Ups	Set Ups	32,000	8,727	23,273	32,000
	General Factory	MHs	268,000	136,913	131,087	268,000
	Total Overheads			191,355	188,645	380,000
6 & 7	Overhead Rate per unit			318.92	209.61
	Total Product Cost per unit
	Direct Material			90.00	120.00
	Direct Labour			120.00	60.00
	Overheads			318.92	209.61
8 & 9	Total Product Cost per unit			528.92	389.61