erbert Ltd manufactures parts for battery electric vehicles. The details of the two parts and relevant information are given below for one period: Product parts Part X Part Y Output in units: 7,200 10,500 Cost per unit: Direct material $35 $45 Direct labour $25 $20 Total machine hours 1,200 2,800 Number of production runs 24 35 Orders executed 120 140 Number of shipments 35 40 The data for activity centre, budgeted overhead cost and cost driver are as follows: Activity centre Budgeted overhead cost $ Cost driver Machining 180,000 Machine hours Set-up 59,000 Number of production runs Inspection/Quality control 29,500 Number of production runs Material handling 78,000 Orders executed Delivery 15,000 Number of shipments Total overhead costs $361,500 Required: Calculate the overhead rate based on traditional overhead allocation rate with output in units as the base. Determine the total cost to produce one unit of Part X and one unit of Part Y. Calculate the overhead rate for each activity centre based on activity-based costing techniques. Determine the total cost to produce one unit of Part X and one unit of Part Y. Using the data available, explain the differences between the unit overhead costs between a) and b) above.
erbert Ltd manufactures parts for battery electric vehicles. The details of the two parts and relevant information are given below for one period: Product parts Part X Part Y Output in units: 7,200 10,500 Cost per unit: Direct material $35 $45 Direct labour $25 $20 Total machine hours 1,200 2,800 Number of production runs 24 35 Orders executed 120 140 Number of shipments 35 40 The data for activity centre, budgeted overhead cost and cost driver are as follows: Activity centre Budgeted overhead cost $ Cost driver Machining 180,000 Machine hours Set-up 59,000 Number of production runs Inspection/Quality control 29,500 Number of production runs Material handling 78,000 Orders executed Delivery 15,000 Number of shipments Total overhead costs $361,500 Required: Calculate the overhead rate based on traditional overhead allocation rate with output in units as the base. Determine the total cost to produce one unit of Part X and one unit of Part Y. Calculate the overhead rate for each activity centre based on activity-based costing techniques. Determine the total cost to produce one unit of Part X and one unit of Part Y. Using the data available, explain the differences between the unit overhead costs between a) and b) above.
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Herbert Ltd manufactures parts for battery electric vehicles. The details of the two parts and relevant information are given below for one period:
| Product parts | Part X | Part Y |
| Output in units: | 7,200 | 10,500 |
| Cost per unit: | ||
| Direct material | $35 | $45 |
| Direct labour | $25 | $20 |
| Total machine hours | 1,200 | 2,800 |
| Number of production runs | 24 | 35 |
| Orders executed | 120 | 140 |
| Number of shipments | 35 | 40 |
The data for activity centre, budgeted
| Activity centre |
Budgeted overhead cost $ |
Cost driver |
| Machining | 180,000 | Machine hours |
| Set-up | 59,000 | Number of production runs |
| Inspection/Quality control | 29,500 | Number of production runs |
| Material handling | 78,000 | Orders executed |
| Delivery | 15,000 | Number of shipments |
| Total overhead costs | $361,500 |
Required:
- Calculate the overhead rate based on traditional overhead allocation rate with output in units as the base. Determine the total cost to produce one unit of Part X and one unit of Part Y.
- Calculate the overhead rate for each activity centre based on activity-based costing techniques. Determine the total cost to produce one unit of Part X and one unit of Part Y.
- Using the data available, explain the differences between the unit overhead costs between a) and b) above.
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