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Estimate D Expected Activity - Cost Driver Overhea D Activity Centers (And Cost Driver) Costs Total Product X Product Y

A Inc manufactures products X and Y. Product X has 2000 units requiring 10,000 total labor hours. Product Y has 10000 units requiring 40,000 total labor hours. Manufacturing overhead is $800,000 annually. The document provides labor, material, and overhead costs to calculate unit product costs using traditional costing and activity-based costing.

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Janiah Aaliyah M. Drakes
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53 views2 pages

Estimate D Expected Activity - Cost Driver Overhea D Activity Centers (And Cost Driver) Costs Total Product X Product Y

A Inc manufactures products X and Y. Product X has 2000 units requiring 10,000 total labor hours. Product Y has 10000 units requiring 40,000 total labor hours. Manufacturing overhead is $800,000 annually. The document provides labor, material, and overhead costs to calculate unit product costs using traditional costing and activity-based costing.

Uploaded by

Janiah Aaliyah M. Drakes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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A Inc manufactures and sells two products; X and Y.

Annual Sales in units, labour


time and total manufacturing time per year are provided below:

Total Hours

Product X 2000 units X 5hrs 10,000


Product Y 10000 units X 4 hrs. 40,000

Total hours 50,000

Cost for materials and labour for one unit of each product are given below:

Product
X Y
Direct $ $
materials 25 17
Direct Labour $6/hr. 30 24

Manufacturing overhead costs total $800, 000 each year. The breakdown of these
costs between the companys six activity centres is given below. The cost driver for
each activity centre is shown in parentheses.

Estimate Expected Activity - Cost


d Driver
Overhea
d
Activity Centers (and Cost Product Product
Driver) Costs Total X Y

Labour related $
(dlh) 80,000 50,000 10000 40000
Machine setups (no of
setups) 150,000 5,000 3,000 2,000
Product testing (no of
tests) 160,000 8,000 5,000 3,000

Production orders (no. of orders) 70,000 400 100 300

Material receipts (no of receipts) 90,000 750 150 600

General factory (machine hours) 250,000 40,000 12,000 28,000

800,000
Required:

1. Assume that the company applies overhead cost to products on a basis of


direct labour hours.
a. Compute the predetermined overhead rate that would be used.
b. Determine the unit product cost of each product, using the predetermined
overhead rate computed in 1a.
2. Assume now the company uses ABC costing to compute overhead rates.
a. Compute the ohr for each of the six activity centres listed above.
b. Using the rates, determine the amount of overhead costs that should be
assigned to a unit of each product.
c. Determine the unit product cost of each product and compare this cost to
the cost computed in 1b above.

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