Question

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Model Annual Sales in Units High F 10,000 Great P 16,000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: High F Great P Direct materials $ 38.00 $ 25.40 Direct labor $ 17.52 $ 13.14 Budget factory overhead: Engineering and Design 2,409 engineering hours $ 404,712 Quality Control 12,848 inspection hours 269,808 Machinery 33,726 machine hours 539,616 Miscellaneous Overhead 26,400 direct labor hours 134,904 Total $ 1,349,040 National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: High F Great P Engineering and design hours 969 1,440 Quality control inspection hours 5,648 7,200 Machine hours 20,286 13,440 Labor hours 12,000 14,400 Using activity-based costing, total overhead per unit of the High F model is:

Answer 1

To calculate the total overhead per unit for the High F model using activity-based costing, cost driver rates are determined for each activity, and overhead costs are then allocated based on the activity levels for the High F model. The total allocated overhead for High F is summed and divided by the number of High F units to find the overhead cost per unit, which is approximately $66.60.

Step-by-step explanation:

The student is asking about calculating the total overhead per unit for a product using activity-based costing (ABC) in a manufacturing setting. To calculate the total overhead per unit for the High F model, we need to first determine the cost driver rates for each activity, and then allocate the costs based on activity levels. Below is the step-by-step calculation using the provided data:

Calculate the cost driver rate for each activity:

• Engineering and Design: $404,712 / 2,409 hours = $168 per hour
• Quality Control: $269,808 / 12,848 hours = $21 per hour
• Machinery: $539,616 / 33,726 hours = $16 per hour
• Miscellaneous Overhead: $134,904 / 26,400 hours = $5 per hour

Allocate the costs to High F:

• Engineering and Design: 969 hours x $168/hour = $162,792
• Quality Control: 5,648 hours x $21/hour = $118,608
• Machinery: 20,286 hours x $16/hour = $324,576
• Miscellaneous Overhead: 12,000 hours x $5/hour = $60,000

Add up these costs and divide by the number of units:

• Total allocated overhead for High F: $162,792 + $118,608 + $324,576 + $60,000 = $665,976
• Total overhead per unit for High F: $665,976 / 10,000 units = $66.598

Thus, the total overhead per unit of High F model using activity-based costing is approximately $66.60 (rounded to two decimal places).

Answer 2

$66.73

Step-by-step explanation:

Activity Overhead Cost Activity Base Activity Rate

Engineering and Design $404,712 2,409 $168

Quality Control $269,808 12,848 $21

Machinery $539,616 33,726 $16

Miscellaneous Overhead $134,904 26,400 $5.11

High F

Activity Base-Usage Activity Rate Activity Cost

Engineering and Design 969 $168 $162,792

Quality Control 5,648 $21 $118,608

Machinery 20,286 $16 $324,576

Miscellaneous Overhead 20,286 $5.11 $61,320

Total Overhead cost $667,296

Produced units 10,000

Per unit overhead cost $66.73