6. The following data are for the two products produced by Johan Company. Product A Product B P24 per unit 1.6 DLH per unit 1.2 MH per unit 225 batches 2,000 units 58 modifications 400 customers P120 per unit Direct materials Direct labor hours Machine hours Batches P15 per unit 0.3 DLH per unit 0.1 MH per unit 125 batches Volume Engineering modifications Number of customers Market price 10,000 units 12 modifications 500 customers P30 per unit The company's direct labor rate is P20 per direct labor hour (DLH). Additional information follows. Costs Driver Indirect manufacturing: Engineering support Electricity Setup costs Nonmanufacturing: Customer service P24,500 Engineering modifications 34,000 Machine hours 52,500 Batches 81,000 Number of customers REQUIRED: 1. Compute the manufacturing cost per unit using the plant-wide overhead rate based on direct labor hours. What is the gross profit per unit? 2. How much gross profit is generated by each customer of Product A using the plant-wide overhead rate? How much gross profit is generated by each customer of Product B using the plant-wide overhead rate? What is the cost of providing customer service to each customer? What information is provided by this comparison? 3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit? 4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate? 5. Which method of product costing gives better information to managers of this company? Explain why.
6. The following data are for the two products produced by Johan Company. Product A Product B P24 per unit 1.6 DLH per unit 1.2 MH per unit 225 batches 2,000 units 58 modifications 400 customers P120 per unit Direct materials Direct labor hours Machine hours Batches P15 per unit 0.3 DLH per unit 0.1 MH per unit 125 batches Volume Engineering modifications Number of customers Market price 10,000 units 12 modifications 500 customers P30 per unit The company's direct labor rate is P20 per direct labor hour (DLH). Additional information follows. Costs Driver Indirect manufacturing: Engineering support Electricity Setup costs Nonmanufacturing: Customer service P24,500 Engineering modifications 34,000 Machine hours 52,500 Batches 81,000 Number of customers REQUIRED: 1. Compute the manufacturing cost per unit using the plant-wide overhead rate based on direct labor hours. What is the gross profit per unit? 2. How much gross profit is generated by each customer of Product A using the plant-wide overhead rate? How much gross profit is generated by each customer of Product B using the plant-wide overhead rate? What is the cost of providing customer service to each customer? What information is provided by this comparison? 3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit? 4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate? 5. Which method of product costing gives better information to managers of this company? Explain why.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:6. The following data are for the two products produced by Johan Company.
Product A
Product B
P15 per unit
0.3 DLH per unit
0.1 MH per unit
125 batches
Direct materials
P24 per unit
1.6 DLH per unit
1.2 MH per unit
225 batches
2,000 units
58 modifications
Direct labor hours
Machine hours
Batches
10,000 units
12 modifications
Volume
Engineering modifications
Number of customers
Market price
500 customers
400 customers
P30 per unit
P120 per unit
The company's direct labor rate is P20 per direct labor hour (DLH). Additional information
follows.
Costs
Driver
Indirect manufacturing:
Engineering support
Electricity
Setup costs
Nonmanufacturing:
Customer service
P24,500
34,000
52,500
Engineering modifications
Machine hours
Batches
81,000
Number of customers
REQUIRED:
1. Compute the manufacturing cost per unit using the plant-wide overhead rate based on
direct labor hours. What is the gross profit per unit?
2. How much gross profit is generated by each customer of Product A using the plant-wide
overhead rate? How much gross profit is generated by each customer of Product B using
the plant-wide overhead rate? What is the cost of providing customer service to each
customer? What information is provided by this comparison?
3. Determine the manufacturing cost per unit of each product line using ABC. What is the
gross profit per unit?
4. How much gross profit is generated by each customer of Product A using ABC? How
much gross profit is generated by each customer of Product B using ABC? Is the gross
profit per customer adequate?
5. Which method of product costing gives better information to managers of this company?
Explain why.
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