labor-hours. ompany's total manufacturing overhead for the year is expected to be $ Tred: ne company currently applies manufacturing overhead to products usin ethod is followed, how much overhead cost would be applied to each p e total amount of overhead cost that would be applied to each product. init of Product H? Product L? How much overhead cost is applied in to anagement is considering an activity-based costing system and would oduct costs. For purposes of discussion, it has been suggested that all c
labor-hours. ompany's total manufacturing overhead for the year is expected to be $ Tred: ne company currently applies manufacturing overhead to products usin ethod is followed, how much overhead cost would be applied to each p e total amount of overhead cost that would be applied to each product. init of Product H? Product L? How much overhead cost is applied in to anagement is considering an activity-based costing system and would oduct costs. For purposes of discussion, it has been suggested that all c
Chapter1: Financial Statements And Business Decisions
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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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![Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell
40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 direct
labor-hours.
The company's total manufacturing overhead for the year is expected to be $1,632,000.
Required:
1. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this
method is followed, how much overhead cost would be applied to each product? Compute both the overhead cost per unit and
the total amount of overhead cost that would be applied to each product. (In other words, how much overhead cost is applied to
a unit of Product H? Product L? How much overhead cost is applied in total to all the units of Product H? Product L?)
2. Management is considering an activity-based costing system and would like to know what impact this change might have on
product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a
product-level cost. The total manufacturing overhead would be divided in half between the two products, with $816,000
assigned to Product H and $816,000 assigned to Product L.
If this suggestion is followed, how much overhead cost per unit would be assigned to each product?
3. Explain the impact on unit product costs of the switch in costing systems.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9cc56646-1dea-40cf-8e27-79a7551092e7%2F620d6ff4-ffba-4446-a3f5-d5da6fcdf435%2Fyo1slo8_processed.png&w=3840&q=75)
Transcribed Image Text:Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell
40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 direct
labor-hours.
The company's total manufacturing overhead for the year is expected to be $1,632,000.
Required:
1. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this
method is followed, how much overhead cost would be applied to each product? Compute both the overhead cost per unit and
the total amount of overhead cost that would be applied to each product. (In other words, how much overhead cost is applied to
a unit of Product H? Product L? How much overhead cost is applied in total to all the units of Product H? Product L?)
2. Management is considering an activity-based costing system and would like to know what impact this change might have on
product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a
product-level cost. The total manufacturing overhead would be divided in half between the two products, with $816,000
assigned to Product H and $816,000 assigned to Product L.
If this suggestion is followed, how much overhead cost per unit would be assigned to each product?
3. Explain the impact on unit product costs of the switch in costing systems.
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