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Model N 800 XL Model N 500 Activity Cost Pool Machine setups Special processing General factory Direct Labor- Hours per Unit 3.0 2.0 Activity Measure Number of setups Machine-hours Direct labor-hours Annual Production 3,000 units 10,000 units Additional information about the company follows: a. Model N 800 XL requires $60 in direct materials per unit, and Model N 500 requires $20. b. The direct labor wage rate is $22 per hour. c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Activity Measure Number of setups Machine-hours Direct labor-hours Model N 800 XL 80 Total Direct Labor-Hours 16,000 9,000 9,000 20,000 29,000 Estimated Overhead Cost $ 320,000 260,000 1,305,000 $ 1,885,000 Expected Activity Model N 500 170 0 20,000 Total 250 16,000 29,000 ired: sume that the company continues to use direct labor-hours as the base for applying overhead cost to products.

Model N 800 XL Model N 500 Activity Cost Pool Machine setups Special processing General factory Direct Labor- Hours per Unit 3.0 2.0 Activity Measure Number of setups Machine-hours Direct labor-hours Annual Production 3,000 units 10,000 units Additional information about the company follows: a. Model N 800 XL requires $60 in direct materials per unit, and Model N 500 requires $20. b. The direct labor wage rate is $22 per hour. c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Activity Measure Number of setups Machine-hours Direct labor-hours Model N 800 XL 80 Total Direct Labor-Hours 16,000 9,000 9,000 20,000 29,000 Estimated Overhead Cost $ 320,000 260,000 1,305,000 $ 1,885,000 Expected Activity Model N 500 170 0 20,000 Total 250 16,000 29,000 ired: sume that the company continues to use direct labor-hours as the base for applying overhead cost to products.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Model N 800 XL Model N 500 Activity Cost Pool Machine setups Special processing General factory Direct Labor- Hours per Unit 3.0 2.0 Activity Measure Number of setups Machine-hours Annual Production 3,000 units 10,000 units Additional information about the company follows: a. Model N 800 XL requires $60 in direct materials per unit, and Model N 500 requires $20. b. The direct labor wage rate is $22 per hour. Direct labor-hours c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Activity Measure Number of setups Machine-hours Direct labor-hours Total Direct Labor-Hours Model N 800 XL 80 9,000 20,000 29,000 16,000 9,000 Estimated Overhead Cost $ 320,000 260,000 1,305,000 $ 1,885,000 Expected Activity Model N 500 170 0 20,000 Total 250 16,000 29,000 Required: 1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. a. Compute the predetermined overhead rate. b. Compute the unit product cost of each model.
Transcribed Image Text:Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Model N 800 XL Model N 500 Activity Cost Pool Machine setups Special processing General factory Direct Labor- Hours per Unit 3.0 2.0 Activity Measure Number of setups Machine-hours Annual Production 3,000 units 10,000 units Additional information about the company follows: a. Model N 800 XL requires $60 in direct materials per unit, and Model N 500 requires $20. b. The direct labor wage rate is $22 per hour. Direct labor-hours c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Activity Measure Number of setups Machine-hours Direct labor-hours Total Direct Labor-Hours Model N 800 XL 80 9,000 20,000 29,000 16,000 9,000 Estimated Overhead Cost $ 320,000 260,000 1,305,000 $ 1,885,000 Expected Activity Model N 500 170 0 20,000 Total 250 16,000 29,000 Required: 1. Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. a. Compute the predetermined overhead rate. b. Compute the unit product cost of each model.
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