Question

value 4.00 points Exercise 34 Contrast ABC and Conventional Product Costs [LO3 4 Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 34,000 units next year and Product L is expected to sell 6,800 units. A unit of either product requires 0.8 direct labor-hours The company's total manufacturing overhead for the year is expected to be $2,774,400 Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? (Round your answers to 2 decimal places.) Product H Product L Overhead cost per unit 1.b. Compute the total amount of overhead cost that would be applied to each product Product H ProductLTotal Total overhead cost Management is considering an activity-based costing system and would like to know what impact this change might have on product costs For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,387 200 assigned to Product H and $1,387.200 assigned to Product L 2. If this suggestion is followed, how much overhead cost per unit would be assigned to each product? (Round your answers to 2 decimal places.) Product H Product L Overhead cost per unit ht looks like you haven't started Firefox in a while. Do you want to clean up for a fresh, like-new experence? And by the way, wel ceme back

Answer 1

1-a) Calculation of overhead cost per unit

Particulars	Product H	Product L	Total
A) Expected units to sold	34,000 units	6,800 units	40,800 units
B) Direct labor hours per unit	0.8 DLH	0.8 DLH	0.8 DLH
C) Total Direct Labor Hours (A*B)	27,200	5,440	32,640
D) Total Manufacturing Overhead			$2,774,400
E) Predetermined Overhead Rate (D/C)			$85 per hour
F) Overhead cost per unit ($85 per hour*0.8 hr per unit)	$68	$68	$68

a-2) Calculation of Total Overhead Cost Applied   

Particulars	Product H	Product L	Total
A) Overhead Cost per unit	$68 per unit	$68 per unit	$68 per unit
B) Number of units	34,000 units	6,800 units	40,800 units
C) Total Overhead Cost (A*B)	$2,312,000	$462,400	$2,774,400

b) Calculation of Overhead cost per unit

Particulars	Product H	Product L
A) Total Overhead cost applied	$1,387,200	$1,387,200
B) Number of units	34,000 units	6,800 units
C) Overhead Cost per unit (A/B)	$40.80 per unit	$204 per unit