Swifty is an electronics components manufacturer. Information about the company's two products follows: AM-2 FM-9 Units produced 20,000 6,000 Direct labor hours required for production 10,000 15,000 Units per batch 4,000 600 Shipping weight per unit 0.50 Ibs. 10 Ibs. The company incurs $ 860,000 in overhead per year and has traditionally applied overhead on the basis of direct labor hours.
Swifty is an electronics components manufacturer. Information about the company's two products follows: AM-2 FM-9 Units produced 20,000 6,000 Direct labor hours required for production 10,000 15,000 Units per batch 4,000 600 Shipping weight per unit 0.50 Ibs. 10 Ibs. The company incurs $ 860,000 in overhead per year and has traditionally applied overhead on the basis of direct labor hours.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Assume that Swifty has identified three activity cost pools.
Transcribed Image Text:**Swifty Electronics Components Manufacturing Overview**
Swifty is an electronics components manufacturer. Below is detailed information about the company's two products: AM-2 and FM-9.
| Product Details | AM-2 | FM-9 |
|------------------------------|-------|-------|
| **Units produced** | 20,000 | 6,000 |
| **Direct labor hours required for production** | 10,000 | 15,000 |
| **Units per batch** | 4,000 | 600 |
| **Shipping weight per unit** | 0.50 lbs. | 10 lbs. |
**Summary:**
- The company produces 20,000 units of AM-2 and 6,000 units of FM-9 annually.
- The direct labor hours required are 10,000 hours for AM-2 and 15,000 hours for FM-9.
- Batch sizes are 4,000 units for AM-2 and 600 units for FM-9.
- The shipping weight per unit is 0.50 lbs for AM-2 and 10 lbs for FM-9.
Swifty incurs $860,000 in overhead costs per year, traditionally applied based on direct labor hours. This approach means overhead costs are distributed according to the total labor hours required to produce each product.
![**Activity-Based Costing Example**
This example demonstrates how to allocate overhead costs to products using activity-based costing (ABC). The table below shows the cost pools, along with their respective costs and cost drivers.
| Pool | Cost | Cost Driver |
|------------|-----------|-----------------------------|
| Assembly | $600,000 | Direct labor hours |
| Setup | $36,000 | Number of setups (1 per batch) |
| Packaging | $224,000 | Weight |
**Instructions**
(i) **Overhead Allocation to Each Product**
Given these activity pools and cost drivers, determine how much overhead should be allocated to each product. Round the per unit rates to 2 decimal places (e.g., 3.54) and final answers to 0 decimal places (e.g., 45,286).
- **Products**: AM-2 and FM-9
- **Total Allocated Overhead**:
- AM-2: $[Input Required]
- FM-9: $[Input Required]
(ii) **Overhead Cost Per Unit**
Calculate the overhead cost per unit for each product. Round answers to 2 decimal places (e.g., 15.25).
- **Products**: AM-2 and FM-9
- **Overhead Cost Per Unit**:
- AM-2: $[Input Required]
- FM-9: $[Input Required]
Use the data provided to distribute overhead costs appropriately, ensuring precise financial tracking and planning.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8ad87420-52d2-4e34-815e-eb9bcb5c95c0%2Ffa6f6f95-4e35-4153-9e47-3a63628f2f79%2F38k7wsjj_processed.png&w=3840&q=75)
Transcribed Image Text:**Activity-Based Costing Example**
This example demonstrates how to allocate overhead costs to products using activity-based costing (ABC). The table below shows the cost pools, along with their respective costs and cost drivers.
| Pool | Cost | Cost Driver |
|------------|-----------|-----------------------------|
| Assembly | $600,000 | Direct labor hours |
| Setup | $36,000 | Number of setups (1 per batch) |
| Packaging | $224,000 | Weight |
**Instructions**
(i) **Overhead Allocation to Each Product**
Given these activity pools and cost drivers, determine how much overhead should be allocated to each product. Round the per unit rates to 2 decimal places (e.g., 3.54) and final answers to 0 decimal places (e.g., 45,286).
- **Products**: AM-2 and FM-9
- **Total Allocated Overhead**:
- AM-2: $[Input Required]
- FM-9: $[Input Required]
(ii) **Overhead Cost Per Unit**
Calculate the overhead cost per unit for each product. Round answers to 2 decimal places (e.g., 15.25).
- **Products**: AM-2 and FM-9
- **Overhead Cost Per Unit**:
- AM-2: $[Input Required]
- FM-9: $[Input Required]
Use the data provided to distribute overhead costs appropriately, ensuring precise financial tracking and planning.
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