Question

Feauto Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, I63E and E76I, about which it has provided the following data: I63E E76I Direct materials per unit $ 22.60 $ 67.80 Direct labor per unit $ 11.40 $ 34.20 Direct labor-hours per unit 0.60 1.80 Annual production (units) 30,000 10,000 The company's estimated total manufacturing overhead for the year is $1,554,600 and the company's estimated total direct labor-hours for the year is 36,000. The company is considering using a form of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Activities and Activity Measures Estimated Overhead Cost Assembling products (DLHs) $ 360,000 Preparing batches (batches) 181,000 Product support (product variations) 1,013,600 Total $ 1,554,600 Expected Activity I63E E76I Total DLHs 18,000 18,000 36,000 Batches 1180 690 1870 Product variations 2360 1380 3740 The manufacturing overhead that would be applied to a unit of product E76I under the activity-based costing system is closest to:

Answer 1

Answer:

Feauto Manufacturing Corporation

The manufacturing overhead that would be applied to a unit of product E76I under the activity-based costing system is closest to:

= $62

Explanation:

a) Data and Calculations:

                                              I63E            E76I

Direct materials per unit  $ 22.60      $ 67.80

Direct labor per unit           $ 11.40      $ 34.20

Direct labor-hours per unit    0.60            1.80

Annual production (units) 30,000        10,000

Estimated manufacturing overhead = $1,554,600

Estimated direct labor hours = 36,000 hours

Activities and Activity Measures  Estimated Overhead Cost

Assembling products (DLHs)            $ 360,000

Preparing batches (batches)                  181,000

Product support (product variations) 1,013,600

Total                                                $ 1,554,600

Expected Activity    I63E     E76I     Total

Total DLHs            18,000  18,000 36,000

Batches                    1,180      690     1,870

Product variations 2,360     1,380   3,740

Activity rates:                                        Costs        Activities     Rates

Assembling products (DLHs)            $ 360,000    36,000     $10 per DLH

Preparing batches (batches)                  181,000       1,870      $96.80 per batche

Product support (product variations) 1,013,600       3,740     $271.02 per product variation

Manufacturing overhead applied:

                                            I63E                                 E76I

Assembling products  $180,000 ($10*18,000)      $180,000 ($10*18,000)  

Preparing batches           114,224 (1,180*$96.80)      66,792(690*$96.80)

Product support            639,607 (2,360*$271.02)  374,007 (1,380*$271.02)

Total overhead            $933,831                           $620,799

Annual production         30,000                               10,000

Overhead per unit        $31.13                               $62.08