1.
1.

Explanation of Solution
Table showing total departmental overhead cost of model 145 and model 212:
Activity | Overhead rate ($) | Value of activity driver of model 145 | Value of activity driver for model 212 | Overhead cost of model 145 ($) (Rate×Value) | Overhead cost of model 212 ($) (Rate×Value) |
Changeover | 625.0 | 400 | 400 | 250,000 | 250,000 |
Machining | 46.5 | 1,800 | 4,200 | 83,700 | 195,300 |
Setups | 1,875.0 | 60 | 60 | 112,500 | 112,500 |
Welding | 60.0 | 800 | 2,200 | 48,080 | 132,220 |
Inspecting | 300.0 | 400 | 300 | 120,000 | 90,000 |
Reworks | 250.0 | 160 | 140 | 40,000 | 35,000 |
Purchasing | 300.0 | 300 | 150 | 90,000 | 45,000 |
Space | 6.4 | 1,500 | 3,500 | 9,600 | 22,400 |
Utilities | 13.0 | 1,500 | 3,500 | 19,500 | 45,500 |
Total overhead cost | 773,380 | 927,920 |
Formula to compute overhead cost per unit is,
Overhead cost per unit=Total overhead costTotal units produced
Model 145
Given,
Total units produced are 1,500.
Substitute 1,500 units for produced units and $773,380 for total overhead cost in the formula.
Overhead cost per unit=$773,3801,500 units=$515.59
Model 212
Given,
Totalunits produced are 3,500.
Substitute 3,500 units for produced units and $927,920 for total overhead cost in the formula.
Overhead cost per unit=$927,9203,500 units=$265.12
Hence, overhead cost per unit for product 145 is $515.59 and for product 212 is $265.12.
Working notes:
Formula to calculate departmental overhead rate is,
Departmental overhead rate=Budgeted overhead costBudgeted activity level
Calculation of overhead rate for changeover activity,
Overhead rate=$5,00,000800=$625.0
Calculation of overhead rate for machining activity,
Overhead rate=$279,0006,000=$46.5
Calculation of overhead rate for setups activity,
Overhead rate=$225,000120=$1,875.0
Calculation of overhead rate for welding activity,
Overhead rate=$180,3003000=$60.1
Calculation of overhead rate for inspecting activity,
Overhead rate=$210,000700=$300.0
Calculation of overhead rate for rework activity,
Overhead rate=$75,000300=$250.0
Calculation of overhead rate for purchasing activity,
Overhead rate=$135,000450=$300.0
Calculation of overhead rate for providing space activity,
Overhead rate=$32,0005,000=$6.4
Calculation of overhead rate for providing utility activity,
Overhead rate=$65,0005,000=$13.0
2.
Total cost per unit for each product line.
2.

Explanation of Solution
Formula to compute total cost per unit is,
Per unit cost=Direct material and labour cost per unit+ Overhead cost per unit
Model 145
Given,
Direct labor and material cost per unit is $250.
Overhead cost per unit is $515.59.
Substitute $250 for direct labor and material cost per unit and $515.59 for overhead cost per unit in the formula.
Total per unit cost=$250+$515.59=$765.59
Model 212
Given,
Direct labor and material cost per unit is $180.
Overhead cost per unit is $265.12.
Substitute $180 for direct labor and material cost per unit and $265.12 for overhead cost per unit in the formula.
Total per unit cost=$180+$265.12=$445.12
Hence, total cost per unit for product 145 is $765.59 and for product 212 is $445.12.
3.
Profit or loss per unit for each model.
3.

Explanation of Solution
Formula to compute profit or loss per unit is,
Profit or loss per unit=Market price−Total cost
Model 145
Given,
Market price per unit is $820.
Total cost per unit is $765.59.
Substitute $820 for market price per unit and $765.59 for total cost per unit in the formula.
Profit or loss per unit=$820− $765.59=$54.41
Model 212
Given,
Market price per unit is $480.
Total cost per unit is $445.12.
Substitute $480 for market price per unit and $445.12 for total cost per unit in the formula.
Profit or loss per unit=$480− $445.12=$34.88
Hence, profit per unit for product 145 is $54.41 andfor product 212 is $34.88.
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