Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below:DeluxeStandard$ 57.00$ 22.00Direct materials per unitDirect labor per unitDirect labor-hours per unitEstimated annual production$ 69.00$ 27.000.70 DLHS1.40 DLHS10,000 units50,000 unitsThe company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Dataconcerning manufacturing overhead and direct labor-hours for the upcoming year appear below:Estimated total manufacturing overheadEstimated total direct labor-hours$ 667,00077,000 DLHSRequired:1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system.2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that wouldhave the following three activity cost pools:Expected ActivityEstimatedOverheadActivity Cost Pools (and Activity Measures)Supporting direct labor (direct labor-hours)Batch setups (setups)Safety testing (tests)CostDeluxeStandardTotal$ 462,000135,00070,0007,00020070,00010077,0003003070100Total manufacturing overhead cost$ 667,000Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system. Platinum Web Services designs and maintains websites for small business entrepreneurs. Competition has been intensifying in recentyears and the company has been losing business to larger web design firms. Summary data concerning the last two years ofoperations follow:Last YearThis Year1,400$Estimated hours of service demanded1,150110,0001,050110,0002,200$110,0001,300$Estimated overhead costActual hours of service providedActual overhead cost incurred$110,0002,200Hours of service available at capacityThe company applies its overhead costs to jobs using the hours of service provided as the allocation base. For example, this year andlast year, 37 service-hours were required to maintain the website for a small company called Verde Consulting. All of Platinum'soverhead costs are fixed, and the actual overhead cost incurred was exactly as estimated at the beginning of the year in last year andthis year.Required:1. Platinum Web Services computes its predetermined overhead rate at the beginning of each year based on the estimated overheadcost and the estimated hours of service demanded for the year. Using this approach, how much overhead would have been applied tothe Verde Consulting job last year? How about this year?2. The president of Platinum Web Services has heard that some companies in the industry have changed to a system of computing thepredetermined overhead rate based on the hours of service available at capacity. He would like to know what effect this methodwould have on job costs. How much overhead cost would have been applied to the Verde Consulting job last year using this method?How much would have been applied this year?3. If Platinum computes its predetermined overhead rate based on the hours of service available at capacity as in (2) above, how muchunused capacity cost would the company have incurred last year? This year?

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Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below: Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production Deluxe $ 69.00 $ 27.00 Standard $ 57.00 $ 22.00 1.40 DLHS 50,000 units 0.70 DLHS 10,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead Estimated total direct labor-hours $ 667,000 77,000 DLHS Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools: Expected Activity Estimated Overhead Cost $ 462,000 135,000 70,000 $ 667,000 Activity Cost Pools (and Activity Measures) Supporting direct labor (direct labor-hours) Batch setups (setups) Safety testing (tests) Total 77,000 300 Deluxe 7,000 200 Standard 70,000 100 30 70 100 Total manufacturing overhead cost Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q