Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below: DeluxeStandardDirect materials per unit$69.00 $57.00 Direct labor per unit$27.00 $22.00 Direct labor-hours per unit 0.70DLHs 1.40DLHsEstimated annual production 10,000units 50,000units 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$667,000 Estimated total direct labor-hours 77,000DLHs Required: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 ActivityActivity Cost Pools (and Activity Measures)EstimatedOverhead CostDeluxeStandardTotalSupporting direct labor (direct labor-hours)$462,0007,00070,00077,000Batch setups (setups) 135,000200100300Safety testing (tests) 70,0003070100Total manufacturing overhead cost$667,000 Determine 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 YearEstimated hours of service demanded1,400$1,150110,0001,050110,0002,200Estimated overhead cost$110,0001,300$Actual 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?Complete this question by entering your answers in the tabs below.Required 1Required 2Required 3Platinum Web Services computes its predetermined overhead rate at the beginning of each year based on the estimatedoverhead cost and the estimated hours of service demanded for the year. Using this approach, how much overhead wouldhave been applied to the Verde Consulting job last year? How about this year? (Round your answers to the nearest wholedollar amount.)Last YearThis YearOverhead applied to Verde Consulting$2,700$3,200< Required 1Required 2 >

The question is based on the concept of Cost Accounting. As per the Bartleby guidelines we are…

Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below: Deluxe Standard Direct materials per unit $ 69.00 $ 57.00 Direct labor per unit $ 27.00 $ 22.00 Direct labor-hours per unit 0.70 DLHs 1.40 DLHs Estimated annual production 10,000 units 50,000 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 $ 667,000 Estimated total direct labor-hours 77,000 DLHs Required: 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 Activity Cost Pools (and Activity Measures) Estimated Overhead Cost Deluxe Standard Total Supporting direct labor (direct labor-hours) $ 462,000 7,000 70,000 77,000 Batch setups (setups) 135,000 200 100 300 Safety testing (tests) 70,000 30 70 100 Total manufacturing overhead cost $ 667,000 Determine the unit product costs of the Deluxe and Stan

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Chapter1: Financial Statements And Business Decisions

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Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:

	Deluxe	Standard
Direct materials per unit	$	69.00		$	57.00
Direct labor per unit	$	27.00		$	22.00
Direct labor-hours per unit		0.70	DLHs		1.40	DLHs
Estimated annual production		10,000	units		50,000	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	$	667,000
Estimated total direct labor-hours		77,000	DLHs

Required:

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
Activity Cost Pools (and Activity Measures)	Estimated Overhead Cost	Deluxe	Standard	Total
Supporting direct labor (direct labor-hours)	$	462,000	7,000	70,000	77,000
Batch setups (setups)		135,000	200	100	300
Safety testing (tests)		70,000	30	70	100
Total manufacturing overhead cost	$	667,000

Determine 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 recent
years and the company has been losing business to larger web design firms. Summary data concerning the last two years of
operations follow:
Last Year
This Year
Estimated hours of service demanded
1,400
$
1,150
110,000
1,050
110,000
2,200
Estimated overhead cost
$
110,000
1,300
$
Actual hours of service provided
Actual overhead cost incurred
$
110,000
2,200
Hours of service available at capacity
The company applies its overhead costs to jobs using the hours of service provided as the allocation base. For example, this year and
last year, 37 service-hours were required to maintain the website for a small company called Verde Consulting. All of Platinum's
overhead costs are fixed, and the actual overhead cost incurred was exactly as estimated at the beginning of the year in last year and
this year.
Required:
1. Platinum Web Services computes its predetermined overhead rate at the beginning of each year based on the estimated overhead
cost and the estimated hours of service demanded for the year. Using this approach, how much overhead would have been applied to
the 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 the
predetermined overhead rate based on the hours of service available at capacity. He would like to know what effect this method
would 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 much
unused capacity cost would the company have incurred last year? This year?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Platinum Web Services computes its predetermined overhead rate at the beginning of each year based on the estimated
overhead cost and the estimated hours of service demanded for the year. Using this approach, how much overhead would
have been applied to the Verde Consulting job last year? How about this year? (Round your answers to the nearest whole
dollar amount.)
Last Year
This Year
Overhead applied to Verde Consulting
$
2,700
$
3,200
< Required 1
Required 2 >

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