Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 69,000 units of EX300 and 13,400 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: EX300 $375,325 $129,000 Total $546,875 $176,000 TX500 Direct materials Direct labor $171,550 $ 47,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Manufacturing Overhead $182,600 249,900 187,070 84,460 Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Activity Cost Pool (and Activity Measure) EX300 99,000 120 1 TX500 67,000 390 1 Total 166,000 510 $129,000 $47,000 $176,000 $704,000 Total manufacturing overhead cost Required: 1-a. Compute the plantwide overhead rate that would be used in the company's 1-b. Using the plantwide rate, compute the unit product cost for each product. 2-a. Compute the activity rate for each activity cost pool. 2-b. Using the activity rates, compute the unit product cost for each product. ventional cost system. n tahs below
Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 69,000 units of EX300 and 13,400 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: EX300 $375,325 $129,000 Total $546,875 $176,000 TX500 Direct materials Direct labor $171,550 $ 47,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Manufacturing Overhead $182,600 249,900 187,070 84,460 Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Activity Cost Pool (and Activity Measure) EX300 99,000 120 1 TX500 67,000 390 1 Total 166,000 510 $129,000 $47,000 $176,000 $704,000 Total manufacturing overhead cost Required: 1-a. Compute the plantwide overhead rate that would be used in the company's 1-b. Using the plantwide rate, compute the unit product cost for each product. 2-a. Compute the activity rate for each activity cost pool. 2-b. Using the activity rates, compute the unit product cost for each product. ventional cost system. n tahs below
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces
69,000 units of EX300 and 13,400 units of TX500. The company's conventional cost system allocates manufacturing overhead to
products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the
company's two product lines is shown below:
EX300
$375,325
$129,000
Total
$546,875
$176,000
TX500
Direct materials
Direct labor
$171,550
$ 47,000
The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four
activities as shown below:
Activity
Manufacturing
Overhead
$182,600
249,900
187,070
84,460
$704,000
Activity Cost Pool
(and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-level (number of products)
General factory (direct labor dollars)
EX300
99,000
120
1
TX500
67,000
390
1
Total
166,000
510
2
$129,000
$47,000
$176,000
Total manufacturing overhead cost
Required:
1-a. Compute the plantwide overhead rate that would be used in the company's
1-b. Using the plantwide rate, compute the unit product cost for each product.
2-a. Compute the activity rate for each activity cost pool.
2-b. Using the activity rates, compute the unit product cost for each product.
ventional cost system.
n tahs below
Transcribed Image Text:Required:
1-a. Compute the plantwide overhead rate that would be used in the company's conventional cost system.
1-b. Using the plantwide rate, compute the unit product cost for each product.
2-a. Compute the activity rate for each activity cost pool.
2-b. Using the activity rates, compute the unit product cost for each product.
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2A
Req 2B
Using the plantwide rate, compute the unit product cost for each product. (Round your intermediate calculations and final
answers to 2 decimal places.)
EX300
TX500
Unit product cost
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