Metalarte Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets, respectively. The following additional data apply: 2,700 inspection hours   BRASS CHROME WHITE Projected sales in units 30,000 50,000 40,000         PER UNIT data:       Selling price $40 $20 $30 Direct materials $8 $4 $8 Direct labor $15 $3 $9 Overhead cost based on direct labor hours: (traditional system) $12 $3 $9 Hours per 1000-unit batch:       Direct labor hours 40 10 30 Machine hours 25 25 10 Setup hours 1.0 0.5 1.0 Inspection hours 30 20 20         Total overhead costs and activity levels for the year are estimated as follows: Activity   Overhead costs Activity levels Direct labor hours     2,900 hours Machine hours      2,400 hours Setups   $465,500 95 setup hours Inspections   $405,000     $870,500         Required: Using the traditional system, determine the operating profit per unit for the brass style of faucet.   Determine the activity-cost-driver rate for setup costs and inspection costs.   Using the ABC system, for the brass style of faucet: compute the estimated overhead costs per unit.  compute the estimated operating profit per unit.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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  1. Metalarte Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets, respectively. The following additional data apply:

2,700 inspection hours

 

BRASS

CHROME

WHITE

Projected sales in units

30,000

50,000

40,000

 

 

 

 

PER UNIT data:

 

 

 

Selling price

$40

$20

$30

Direct materials

$8

$4

$8

Direct labor

$15

$3

$9

Overhead cost based on direct labor hours: (traditional system)

$12

$3

$9

Hours per 1000-unit batch:

 

 

 

Direct labor hours

40

10

30

Machine hours

25

25

10

Setup hours

1.0

0.5

1.0

Inspection hours

30

20

20

 

 

 

 

Total overhead costs and activity levels for the year are estimated as follows:

Activity

 

Overhead costs

Activity levels

Direct labor hours

 

 

2,900 hours

Machine hours 

 

 

2,400 hours

Setups

 

$465,500

95 setup hours

Inspections

 

$405,000

 

 

$870,500

 

 

 

 

Required:

  1. Using the traditional system, determine the operating profit per unit for the brass style of faucet.

 

  1. Determine the activity-cost-driver rate for setup costs and inspection costs.

 

  1. Using the ABC system, for the brass style of faucet:
  2. compute the estimated overhead costs per unit.
  3.  compute the estimated operating profit per unit.
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