Question

Need help with req B asap
EMD Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring 3 hours of direct labor time per unit to manufacture compared to 2 hour of direct labor time for Product S. Product W is produced on an automated production line Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $1,140,940 in manufacturing overhead costs and produce 10,500 units of Product W and 42,000 units of Product S during the current year. Unit cost for materials and direct labor are: Product SProduet w Direct material Direct labor 34 14 s 17 Required: a-1. Compute the predetermined overhead rate under the current method of allocation. a-2. Determine the unit product cost of each product for the current year. b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Total Activit Total 3,770 693 18,690 1,615 Activity Cost Pool Total Cost 652,210 51,975 112,140 324,615 Products Product W Machine aetups required Purchase orders issued Machine-hours required Maintenance requests issued 1,510 531 7,900 737 2,260 162 10,790 878 $1,140,940 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

Answer 1

B)

Step 1 :Calculation of overhead allocation to product and overhead cost per unit:

Activity	Formula	Product S	Product W
	Activity cost	/	Activity driver	=	Activity rate	Activity used	Overhead cost allocated (Activity used*activity rate)	Activity used	Overhead cost allocated (Activity used*activity rate)
Machine setup	652210		3770		173	1510	1510*173=261230	2260	2260*173=390980
Purchase order	51975		693		75	531	531*75=39825	162	162*75=12150
Machine hours required	112140		18690		6	7900	7900*6=47400	10790	10790*6=64740
Maintenance request issued	324615		1615		201	737	737*201=148137	878	878*201=176478
Total overhead cost allocated							496592		644348
Number of units							42000		10500
overhead cost per unit							496592/42000 =$ 11.82		644348/10500= 61.37

Calculation of unit cost:

	Product S	Product W
Direct material	17	34
Direct labor	8	14
overhead cost	11.82	61.37
Unit cost	36.82	109.37