Puget World, Inc., manufactures two models of television sets, theN 800 XL model and the N 500 model. Data regarding the two productsfollow:

Direct Labor-
Hours per Unit Annual Production Total Direct
Labor-Hours

Model N 800 XL 1.8 4,800 units 8,640

Model N 500 0.9 28,000 units 25,200

33,840

Additional information about the company follows:

a.
Model N 800 XL requires $71 in direct materials per unit, and ModelN 500 requires $52.

b. The direct labor wage rate is $11 per hour.

c.
The company has always used direct labor-hours as the base forapplying manufacturing overhead cost to products.

d.
Model N 800 XL is more complex to manufacture than Model N 500 andrequires the use of special equipment. Consequently, the company isconsidering the use of activity-based costing to assignmanufacturing overhead cost to products. Three activity cost poolshave been identified as follows:

Activity Cost Pool Activity
Measure Estimated
Overhead Cost

Machine setups Number of setups $ 356,000

Special processing Machine-hours 176,000

General factory Direct labor-hours 1,268,000

$ 1,800,000

Expected Activity

Activity Measure Model N 800 XL Model N 500 Total

Number of setups 50 100 150

Machine-hours 12,000 0 12,000

Direct labor-hours 8,640 25,200 33,840

2-16-2011

1. Assume that the company continues to use direct labor-hours as thebase for applying overhead cost to products.(Do not roundintermediate calculations.Round your answers to2 decimal places.)

a. Compute the predetermined overhead rate.

Predetermined overhead rate $ per DLH

b. Compute the unit product cost of each model.

Model N 800 XL $

Model N 500 $

2. Assume that the company decides to use activity-based costing toassign manufacturing overhead cost to products.

a(1)
Compute the activity rate for each activity cost pool. (Round your answers to2 decimal places.)

Machine setup $ per setup

Special processing $ per MH

General factory $ per DLH

a(2)
Determine the amount of overhead cost that would be assigned toeach model using the activity-based costing system. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)

Model N 800 XL Model N 500

Overhead cost per unit $ $

b.
Compute the unit product cost of each model. (Do not round intermediatecalculations. Round your answers to 2 decimalplaces.)

Model N 800 XL Model N 500

Unit product cost $ $

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Question

Puget World, Inc., manufactures two models of television sets, theN 800 XL model and the N 500 model. Data regarding the two productsfollow:

a.	Model N 800 XL requires $71 in direct materials per unit, and ModelN 500 requires $52.
b.	The direct labor wage rate is $11 per hour.
c.	The company has always used direct labor-hours as the base forapplying manufacturing overhead cost to products.
d.	Model N 800 XL is more complex to manufacture than Model N 500 andrequires the use of special equipment. Consequently, the company isconsidering the use of activity-based costing to assignmanufacturing overhead cost to products. Three activity cost poolshave been identified as follows:

1.	Assume that the company continues to use direct labor-hours as thebase for applying overhead cost to products.(Do not roundintermediate calculations.Round your answers to2 decimal places.)

a.	Compute the predetermined overhead rate.

b.	Compute the unit product cost of each model.

2.	Assume that the company decides to use activity-based costing toassign manufacturing overhead cost to products.

a(1)	Compute the activity rate for each activity cost pool. (Round your answers to2 decimal places.)

a(2)	Determine the amount of overhead cost that would be assigned toeach model using the activity-based costing system. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)

b.	Compute the unit product cost of each model. (Do not round intermediatecalculations. Round your answers to 2 decimalplaces.)

Unlock all answers

a.	Model N 800 XL requires $72 in direct materials perunit, and Model N 500 requires $48.
b.	The direct labor wage rate is $11 per hour.
c.	The company has always used direct labor-hours as the base forapplying manufacturing overhead cost to products.
d.	Model N 800 XL is more complex to manufacture than Model N 500 andrequires the use of special equipment. Consequently, the company isconsidering the use of activity-based costing to assignmanufacturing overhead cost to products. Three activity cost poolshave been identified as follows:

Required:
1.	Assume that the company continues to use direct labor-hours as thebase for applying overhead cost to products.(Do not roundintermediate calculations.Round your answers to2 decimal places.)

a.	Model N 800 XL requires $73 in direct materials perunit, and Model N 500 requires $52.
b.	The direct labor wage rate is $11 per hour.
c.	The company has always used direct labor-hours as the base forapplying manufacturing overhead cost to products.
d.	Model N 800 XL is more complex to manufacture than Model N 500 andrequires the use of special equipment. Consequently, the company isconsidering the use of activity-based costing to assignmanufacturing overhead cost to products. Three activity cost poolshave been identified as follows: