# Question & Answer: in manufacturing overhead costs during the current period. Overhead currently is applied to the pro…..

Cabat Company manufactures two products, Product C and Product D. The company estimated it would incur \$189,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period’s operations appear below:

 Product C Product D Estimated volume 4,400 units 3,600 units Direct labor-hours per unit 2.40 hours 2.00 hour Direct materials cost per unit \$ 17.60 \$ 30.90 Direct labor cost per unit \$ 15.60 \$ 12.00
 Requried: a-1. Compute the predetermined overhead rate under the current method. (Round your answer to 2 decimal places.)
 Predertemined overhead rate ____ per DLH
 a-2. Determine the unit product cost of each product for the current year. (Do not round your intermediate calculations. Round your final answer to 2 decimal places.)
 Product C Prodcut D Unit Product Cost
 b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:
 Activity Cost Pools Estimated Overhead Costs Expected Activity Product C Product D Total Machine setups \$ 13,390 230 240 470 Purchase orders 78,840 1,060 1,400 2,460 General factory 97,680 10,560 7,200 17,760 Total \$ 189,910

Determine the unit product cost of each product for the current period using the activity-based costing approach. (Round your intermediate calculations and final answers to 2 decimal places.)

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 Product C Prodcut D Unit Product Cost

Total estimated labor hours = 4400 x 2.4 + 3600 x 2 = 17760 hours

Predetermined rate = 189910 / 17760 = 10.69 per hour

C cost = 17.60 D.M+15.60 D.L + 2.4 hrs x 10.69 per hr = 58.86
D cost = 30.90 D.M+12.00D.L +2 hrs x 10.69 per hr = 64.28

2) The activity rates for each activity cost pool are as follows:

 Machine setups 13390 470 28.49 Purchase orders 78840 2460 32.05 General factory 97680 17760 5.5
 The overhead cost charged to each product is: Product C Product D Activity Amount Activity Amount Machine setups 230 6552.55 240 6837.45 Purchase orders 1060 33971.71 1400 44868.3 General factory 10560 58080.00 7200 39600 Total 98604.26 91305.74
 Overhead cost per unit Product C: \$98604.26 ÷ 4400 units = \$22.41 per unit Product D: \$91305.74 ÷ 3600 units = \$25.36 per unit
 Using activity based costing, the unit product cost of each product would be: Product C Product D D.M 17.6 30.9 D.L 15.6 12 Manufacturing O.H 22.41 25.36 Total unit product cost 55.61 68.26