Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC system to assign costs to the two products. For the coming year, the company has the following overhead activities, costs, and activity drivers: activity expected cost activity driver activity capacity setups $214,612 set up hours 10,000 machining $420,000 machine hours 20,000 moving $112,500 move hours 5,000 total overhead $747,112 At practical capacity, the expected activity demands for each product are as follows: regular performance model high performance model units completed 30,000 8,000 set up hours 8,000 2,000 machine hours 6,000 14,000 moving hours 1,000 4,000 The production cycle time for the regular performance camshaft is 0.50 (hours per unit) and that of the high performance camshaft is 2.5 (hours per unit). Required: Calculate the consumption ratios for each activity. Use these consumption ratios to assign the total overhead to each camshaft model and then calculate the overhead cost per unit for each model (round unit cost to two decimal places).
Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC system to assign costs to the two products. For the coming year, the company has the following overhead activities, costs, and activity drivers: activity expected cost activity driver activity capacity setups $214,612 set up hours 10,000 machining $420,000 machine hours 20,000 moving $112,500 move hours 5,000 total overhead $747,112 At practical capacity, the expected activity demands for each product are as follows: regular performance model high performance model units completed 30,000 8,000 set up hours 8,000 2,000 machine hours 6,000 14,000 moving hours 1,000 4,000 The production cycle time for the regular performance camshaft is 0.50 (hours per unit) and that of the high performance camshaft is 2.5 (hours per unit). Required: Calculate the consumption ratios for each activity. Use these consumption ratios to assign the total overhead to each camshaft model and then calculate the overhead cost per unit for each model (round unit cost to two decimal places).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC system to assign costs to the two products.
For the coming year, the company has the following
| activity | expected cost | activity driver | activity capacity |
|
setups |
$214,612 | set up hours | 10,000 |
| machining | $420,000 | machine hours | 20,000 |
| moving | $112,500 | move hours | 5,000 |
| total overhead | $747,112 |
At practical capacity, the expected activity demands for each product are as follows:
| regular performance model | high performance model | |
| units completed | 30,000 | 8,000 |
| set up hours | 8,000 | 2,000 |
| machine hours | 6,000 | 14,000 |
| moving hours | 1,000 | 4,000 |
The production cycle time for the regular performance camshaft is 0.50 (hours per unit) and that of the high performance camshaft is 2.5 (hours per unit).
Required:
- Calculate the consumption ratios for each activity. Use these consumption ratios to assign the total overhead to each camshaft model and then calculate the overhead cost per unit for each model (round unit cost to two decimal places).
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