XYZ Company manufactures two products: Product X and Product Y. Annual production and sales are 1,500 units of Product X and 1,000 units of Product Y. The company has traditionally used direct labor hours as the basis for applying all manufacturing overhead to products. Product X requires 0.25 direct labor hours per unit and Product Y requires 0.50 direct labor hours per unit. The total estimated overhead for the next period is $85,000. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity A, Activity B, and General Factory-with estimated overhead costs and expected activity as follows: Activity Cost Pool Estimated Overhead Cost Expected Activity Product X Product Y Total Activity A $30,000 1,200 600 600 1,200 Activity B $20,000 1,000 500 500 1,000 General Factory $35,000 2,000 1,000 1,000 2,000 Total $85,000 What is the predetermined overhead rate under the traditional costing system?

XYZ Company manufactures two products: Product X and Product Y. Annual production and sales are 1,500 units of Product X and 1,000 units of Product Y. The company has traditionally used direct labor hours as the basis for applying all manufacturing overhead to products. Product X requires 0.25 direct labor hours per unit and Product Y requires 0.50 direct labor hours per unit. The total estimated overhead for the next period is $85,000. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity A, Activity B, and General Factory-with estimated overhead costs and expected activity as follows: Activity Cost Pool Estimated Overhead Cost Expected Activity Product X Product Y Total Activity A $30,000 1,200 600 600 1,200 Activity B $20,000 1,000 500 500 1,000 General Factory $35,000 2,000 1,000 1,000 2,000 Total $85,000 What is the predetermined overhead rate under the traditional costing system?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 6PB: Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen...

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Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?
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