For many years, Zapro Company manufactured a single productcalled a mono-relay. Then three years ago, the company automated aportion of its plant and at the same time introduced a secondproduct called a bi-relay that has become increasingly popular. Thebi-relay is a more complex product, requiring one hour of directlabor time per unit to manufacture and extensive machining in theautomated portion of the plant. The mono-relay requires only 0.75hour of direct labor time per unit and only a small amount ofmachining. Manufacturing overhead costs are currently assigned toproducts on the basis of direct labor-hours.
Despite the growing popularity of the company's new bi-relay,profits have been declining steadily. Management is beginning tobelieve that there may be a problem with the company's costingsystem. Material and labor costs per unit are as follows:
Mono-Relay Bi-Relay
Direct materials $ 35 $ 48
Direct labor (0.75 hours @ $12 per hour and
1.0 hours @ $12 per hour) $ 9 $ 12
Management estimates that the company will incur $1,000,000 inmanufacturing overhead costs during the current year and 40,000units of the mono-relay and 10,000 units of the bi-relay will beproduced and sold.
7.
value:
5 points
Requirement 1:
Compute the predetermined manufacturing overhead rate assuming thatthe company continues to apply manufacturing overhead cost on thebasis of direct labor-hours. Using this rate and other data fromthe problem, determine the unit product cost of each product.(Round your answer to 2 decimal places. Omit the "$" sign in yourresponse.)
Predetermined manufacturing overhead rate $ per DLH
Unit product cost of Mono-Relay $
Unit product cost of Bi-Relay $
Check My WorkeBook Links (3)References
Worksheet Learning Objective: 03-3
Learning Objective: 03-2 Learning Objective: 03-4
8.
value:
5 points
Requirement 2:
Management is considering using activity-based costing to applymanufacturing overhead cost to products for external financialreports. The activity-based costing system would have the followingfour activity cost pools:
Activity Cost Pool Activity Measure Estimated
Overhead Cost
Maintaining parts inventory Number of part types $ 180,000
Processing purchase orders Number of purchase orders 90,000
Quality control Number of tests run 230,000
Machine related Machine-hours 500,000
$ 1,000,000
Expected Activity
Activity Measure Mono-Relay Bi-Relay Total
Number of part types 75 150 225
Number of purchase orders 800 200 1,000
Number of tests run 2,500 3,250 5,750
Machine-hours 4,000 6,000 10,000
Determine the activity rate (i.e., predetermined overhead rate) foreach of the four activity cost pools. (Omit the "$" sign in yourresponse.)
Activity Cost Pool Activity Rate
Maintaining inventory $ per part type
Processing purchase orders $ per order
Quality control $ per test
Machine-related $ per MH
Check My WorkeBook Links (3)References
Worksheet Learning Objective: 03-3
Learning Objective: 03-2 Learning Objective: 03-4
9.
value:
5 points
Requirement 3:
Using the activity rates you computed in Requirement 2 above, dothe following
(a) Determine the total amount of manufacturing overhead cost thatwould be applied to each product using the activity-based costingsystem. After these totals have been computed, determine the amountof manufacturing overhead cost per unit of each product. (Roundyour answer to 2 decimal places. Omit the "$" sign in yourresponse.)
Overhead per unit of Mono-Relay $
Overhead per unit of Bi-Relay $
(b) Compute the unit product cost of each product. (Round youranswer to 2 decimal places. Omit the "$" sign in yourresponse.)
Unit product cost for Mono-Relay $
Unit product cost for Bi-Relay $
For many years, Zapro Company manufactured a single productcalled a mono-relay. Then three years ago, the company automated aportion of its plant and at the same time introduced a secondproduct called a bi-relay that has become increasingly popular. Thebi-relay is a more complex product, requiring one hour of directlabor time per unit to manufacture and extensive machining in theautomated portion of the plant. The mono-relay requires only 0.75hour of direct labor time per unit and only a small amount ofmachining. Manufacturing overhead costs are currently assigned toproducts on the basis of direct labor-hours.
Despite the growing popularity of the company's new bi-relay,profits have been declining steadily. Management is beginning tobelieve that there may be a problem with the company's costingsystem. Material and labor costs per unit are as follows:
Mono-Relay Bi-Relay
Direct materials $ 35 $ 48
Direct labor (0.75 hours @ $12 per hour and
1.0 hours @ $12 per hour) $ 9 $ 12
Management estimates that the company will incur $1,000,000 inmanufacturing overhead costs during the current year and 40,000units of the mono-relay and 10,000 units of the bi-relay will beproduced and sold.
7.
value:
5 points
Requirement 1:
Compute the predetermined manufacturing overhead rate assuming thatthe company continues to apply manufacturing overhead cost on thebasis of direct labor-hours. Using this rate and other data fromthe problem, determine the unit product cost of each product.(Round your answer to 2 decimal places. Omit the "$" sign in yourresponse.)
Predetermined manufacturing overhead rate $ per DLH
Unit product cost of Mono-Relay $
Unit product cost of Bi-Relay $
Check My WorkeBook Links (3)References
Worksheet Learning Objective: 03-3
Learning Objective: 03-2 Learning Objective: 03-4
8.
value:
5 points
Requirement 2:
Management is considering using activity-based costing to applymanufacturing overhead cost to products for external financialreports. The activity-based costing system would have the followingfour activity cost pools:
Activity Cost Pool Activity Measure Estimated
Overhead Cost
Maintaining parts inventory Number of part types $ 180,000
Processing purchase orders Number of purchase orders 90,000
Quality control Number of tests run 230,000
Machine related Machine-hours 500,000
$ 1,000,000
Expected Activity
Activity Measure Mono-Relay Bi-Relay Total
Number of part types 75 150 225
Number of purchase orders 800 200 1,000
Number of tests run 2,500 3,250 5,750
Machine-hours 4,000 6,000 10,000
Determine the activity rate (i.e., predetermined overhead rate) foreach of the four activity cost pools. (Omit the "$" sign in yourresponse.)
Activity Cost Pool Activity Rate
Maintaining inventory $ per part type
Processing purchase orders $ per order
Quality control $ per test
Machine-related $ per MH
Check My WorkeBook Links (3)References
Worksheet Learning Objective: 03-3
Learning Objective: 03-2 Learning Objective: 03-4
9.
value:
5 points
Requirement 3:
Using the activity rates you computed in Requirement 2 above, dothe following
(a) Determine the total amount of manufacturing overhead cost thatwould be applied to each product using the activity-based costingsystem. After these totals have been computed, determine the amountof manufacturing overhead cost per unit of each product. (Roundyour answer to 2 decimal places. Omit the "$" sign in yourresponse.)
Overhead per unit of Mono-Relay $
Overhead per unit of Bi-Relay $
(b) Compute the unit product cost of each product. (Round youranswer to 2 decimal places. Omit the "$" sign in yourresponse.)
Unit product cost for Mono-Relay $
Unit product cost for Bi-Relay $
