Maple Woods Inc. manufactures lounge chairs available in both a luxury and a standard model. The company has made the standard model for years; the luxury model was introduced several years ago to capture a new segment of the market. Since the introduction of the luxury model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the luxury model have been increasing rapidly. Overhead is applied to products on the basis of direct labour hours. At the beginning of the current year, management estimated that $5,921,376 in overhead costs would be incurred and the company would produce and sell 5,800 units of the luxury model and 42,880 units of the standard model. The luxury model requires 3.0 hours of direct labour time per unit, and the standard model requires 2.0 hours. Materials and labour costs follow: Direct materials cost per unit Direct labour cost per hour Luxury $176 17 Predetermined overhead rate Unit product cost of Luxury Unit product cost of Standard Required: 1. Compute the predetermined overhead rate using direct labour hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Standard $136 20 per DLH
Maple Woods Inc. manufactures lounge chairs available in both a luxury and a standard model. The company has made the standard model for years; the luxury model was introduced several years ago to capture a new segment of the market. Since the introduction of the luxury model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the luxury model have been increasing rapidly. Overhead is applied to products on the basis of direct labour hours. At the beginning of the current year, management estimated that $5,921,376 in overhead costs would be incurred and the company would produce and sell 5,800 units of the luxury model and 42,880 units of the standard model. The luxury model requires 3.0 hours of direct labour time per unit, and the standard model requires 2.0 hours. Materials and labour costs follow: Direct materials cost per unit Direct labour cost per hour Luxury $176 17 Predetermined overhead rate Unit product cost of Luxury Unit product cost of Standard Required: 1. Compute the predetermined overhead rate using direct labour hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Standard $136 20 per DLH
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Maple Woods Inc. manufactures lounge chairs available in both a luxury and a standard model. The company has made the
standard model for years; the luxury model was introduced several years ago to capture a new segment of the market. Since the
introduction of the luxury model, the company's profits have steadily declined, and management has become concerned about the
accuracy of its costing system. Sales of the luxury model have been increasing rapidly.
Overhead is applied to products on the basis of direct labour hours. At the beginning of the current year, management estimated that
$5,921,376 in overhead costs would be incurred and the company would produce and sell 5,800 units of the luxury model and 42,880
units of the standard model. The luxury model requires 3.0 hours of direct labour time per unit, and the standard model requires 2.0
hours. Materials and labour costs follow:
Direct materials cost per unit
Direct labour cost per hour
Luxury
$176
17
Predetermined overhead rate
Unit product cost of Luxury
Unit product cost of Standard
Required:
1. Compute the predetermined overhead rate using direct labour hours as the basis for allocating overhead costs to products.
Compute the unit product cost for one unit of each model. (Do not round intermediate calculations. Round your answers to 2
decimal places.)
Standard
$136
20
per DLH
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