erez Electronics produces video games in three market categories: commercial, home, and miniature. Perez has traditionally located overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently plemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system effective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Total Pooled Cost Unit $404,000 Batch 227,400 Product 116,600 Facility 311,000 Additional data for each of the product lines follow: Commercial $ 25.11/unit $ 10.55/hour 6,000 10,000 Direct materials cost Direct labor st Number of labor hours Number of machine hours Number of production orders Research and development time Types of Costs Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling. Research and development Rent, general utilities, maintenance, facility depreciation, admin. salaries Number of units Square footage 200 10% 15,000 20,000 Home $15.11/unit $ 8.55/hour 12,000 45,000 2,000 20% 45,000 50,000 Miniature $ 12.11/unit $ 9.55/hour 2,000 25,000 800 70% 14,000 30,000 Machine hours Number of production orders Time spent by research department Square footage Total 20,000 80,000 3,000 100% Cost Driver 74,000 100,000 Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.
erez Electronics produces video games in three market categories: commercial, home, and miniature. Perez has traditionally located overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently plemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system effective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Total Pooled Cost Unit $404,000 Batch 227,400 Product 116,600 Facility 311,000 Additional data for each of the product lines follow: Commercial $ 25.11/unit $ 10.55/hour 6,000 10,000 Direct materials cost Direct labor st Number of labor hours Number of machine hours Number of production orders Research and development time Types of Costs Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling. Research and development Rent, general utilities, maintenance, facility depreciation, admin. salaries Number of units Square footage 200 10% 15,000 20,000 Home $15.11/unit $ 8.55/hour 12,000 45,000 2,000 20% 45,000 50,000 Miniature $ 12.11/unit $ 9.55/hour 2,000 25,000 800 70% 14,000 30,000 Machine hours Number of production orders Time spent by research department Square footage Total 20,000 80,000 3,000 100% Cost Driver 74,000 100,000 Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Topic Video
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Subject: accounting
Transcribed Image Text:Perez Electronics produces video games in three market categories: commercial, home, and miniature. Perez has traditionally
allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently
implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system
ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers:
Category Total Pooled Cost
Unit
$404,000
Batch
227,400
116,600
311,000
Product
Facility
Types of Costs.
Indirect labor wages, supplies, factory utilities,
machine maintenance
Materials handling, inventory storage, labor for
setups, packaging, labeling and shipping, scheduling
Research and development
Rent, general utilities, maintenance, facility
depreciation, admin. salaries
Additional data for each of the product lines follow:
Commercial
$25.11/unit
$ 10.55/hour
6,000
10,000
Direct materials cost
Dire
labor cost
Number of labor hours.
Number of machine hours i
Number of production orders
Research and development time
Number of units
Square footage
200
10%
15,000
20,000
Home
$15.11/unit
$8.55/hour
12,000
45,000
2,000
20%
45,000
50,000
Miniature.
$ 12.11/unit
$ 9.55/hour
2,000
25,000
800
70%
14,000
30,000
Machine hours
Number of production orders.
Time spent by research department
Square footage
Total
20,000
80,000
3,000
100%
Cost Driver
74,000
100,000
Required
a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line
using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.
b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs.
Determine the combined cost of all three product lines.
Transcribed Image Text:(For all requirements, round intermediate calculations for allocation rates to 2 decimal places and all other calculations to the
nearest whole dollar. Round "Cost per Unit" to 2 decimal places. Round your answers for "Total Cost" to the nearest whole dollar
amount.)
Type of Product
a. Commercial
Home
Miniature
Combined total
b. Commercial
Home
Miniature
Combined total
$
$
Total Cost
0
Cost per Unit
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