Sander company produces Wall Clocks and Alarm Clocks. The company operates at capacity. Data related to the two products are presented here: Wall Alarm Clocks Clocks Annual production in units 45,000 90,000 Direct material costs $180,000 $360,000 Direct manufacturing labour costs $90,000 $180,000 Direct manufacturing labour-hours 4,500 9,000 Machine-hours 30,000 60,000 Number of production runs 45 45 Inspection hours 1,200 600 Total manufacturing overhead costs are as follows: Total Machining costs Setup costs Inspection costs $360,000 108,000 117,000 Required: Show all calculations a) Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product, (hint: inspection costs, $65 per inspection hour). b) Compute the manufacturing cost per unit for each product. c) How might Sander's managers use the new cost information from its activity- based costing system to better manage its business?

Sander company produces Wall Clocks and Alarm Clocks. The company operates at capacity. Data related to the two products are presented here: Wall Alarm Clocks Clocks Annual production in units 45,000 90,000 Direct material costs $180,000 $360,000 Direct manufacturing labour costs $90,000 $180,000 Direct manufacturing labour-hours 4,500 9,000 Machine-hours 30,000 60,000 Number of production runs 45 45 Inspection hours 1,200 600 Total manufacturing overhead costs are as follows: Total Machining costs Setup costs Inspection costs $360,000 108,000 117,000 Required: Show all calculations a) Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product, (hint: inspection costs, $65 per inspection hour). b) Compute the manufacturing cost per unit for each product. c) How might Sander's managers use the new cost information from its activity- based costing system to better manage its business?

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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