### Fairchild, Inc. Product Costing Analysis**Fairchild, Inc. manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours.** Anticipated overhead and direct labor time for the upcoming accounting period are $1,600,000 and 25,000 hours, respectively. Information about the company’s products follows:#### Regular- **Estimated production volume:** 3,000 units- **Direct materials cost:** $28 per unit- **Direct labor per unit:** 3 hours at $15 per hour#### Deluxe- **Estimated production volume:** 4,000 units- **Direct materials cost:** $42 per unit- **Direct labor per unit:** 4 hours at $15 per hour**Fairchild's overhead of $1,600,000 can be identified with three major activities:** order processing ($250,000), machine processing ($1,200,000), and product inspection ($150,000). These activities are driven by the number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow:| | **Orders Processed** | **Machine Hours Worked** | **Inspection Hours** ||----------------|-----------------------|--------------------------|----------------------|| **Regular** | 320 | 16,000 | 4,000 || **Deluxe** | 180 | 24,000 | 6,000 || **Total** | 500 | 40,000 | 10,000 |#### Required:**A.** Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system.**B.** Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained.**C.** How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted?### Analysis:**A. Pool Rates Calculation for Activity-Based Costing:**1. **Order Processing Pool Rate**: \[ \text{Order Processing Pool Rate} = \frac{\text{Total Order Processing Cost}}{\text{Total Orders Processed}} = \

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Description: ### Fairchild, Inc. Product Costing Analysis**Fairchild, Inc. manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours.** Anticipated overhead and direct labor time for the upcoming accounting period are

Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical…

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2. Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $1,600,000 and 25,000 hours, respectively. Information about the company's products follows.

2. Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $1,600,000 and 25,000 hours, respectively. Information about the company's products follows.

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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### Fairchild, Inc. Product Costing Analysis

**Fairchild, Inc. manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours.** Anticipated overhead and direct labor time for the upcoming accounting period are $1,600,000 and 25,000 hours, respectively. Information about the company’s products follows:

#### Regular
- **Estimated production volume:** 3,000 units
- **Direct materials cost:** $28 per unit
- **Direct labor per unit:** 3 hours at $15 per hour

#### Deluxe
- **Estimated production volume:** 4,000 units
- **Direct materials cost:** $42 per unit
- **Direct labor per unit:** 4 hours at $15 per hour

**Fairchild's overhead of $1,600,000 can be identified with three major activities:** order processing ($250,000), machine processing ($1,200,000), and product inspection ($150,000). These activities are driven by the number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow:

| | **Orders Processed** | **Machine Hours Worked** | **Inspection Hours** |
|----------------|-----------------------|--------------------------|----------------------|
| **Regular** | 320 | 16,000 | 4,000 |
| **Deluxe** | 180 | 24,000 | 6,000 |
| **Total** | 500 | 40,000 | 10,000 |

#### Required:
**A.** Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system.

**B.** Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained.

**C.** How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted?

### Analysis:

**A. Pool Rates Calculation for Activity-Based Costing:**

1. **Order Processing Pool Rate**:
\[
\text{Order Processing Pool Rate} = \frac{\text{Total Order Processing Cost}}{\text{Total Orders Processed}} = \

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