# Question & Answer: units of EX300 and 13,000 units of TX500. The company's conventional cost system allo…..

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Question & Answer: units of EX300 and 13,000 units of TX500. The company's conventional cost system allo…..
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Solution:

– Overhead Rate is the rate which is used to apply manufacturing overhead to products or job orders.

– Normally, it is calculated at the beginning of the period.

– It is calculated by dividing the estimated factory overhead cost by an allocation base (or suitable basis).

– Allocation bases may be direct labor hours, direct labor costs, machine hours etc..

Plant-wide overhead rate means predetermined overhead rate of plant as a whole.

Here,

Allocation Base = Direct labor dollars

Total Direct Labor Dollars = \$170,000

Total Manufacturing Overhead Costs = \$612,000

Plantwide Overhead Rate = Total Manufacturing Overhead Costs \$612,000 / Total Direct Labor Dollars \$170,000

= \$3.6 per DL \$

1-b) Unit Product Cost for each product

 EX300 TX500 Direct materials 371,325 \$167,550 Direct labor 125,000 \$45,000 Allocated manufacturing overhead cost (direct labor cost * 3.6) 450,000 162,000 Total manufacturing costs 946,325 374,550 Units Produced 65,000 Units 13,000 Units Unit Product Cost (Total Manufacturing Cost / Units Produced) \$14.56 \$28.81

2-a) Activity Rate for each activity cost pool

 Activity Manufacturing OH Total Activity Performed Cost per Activity Matching 248,000 160000 MH \$1.55 Per MH Setups 202,500 450 Setup hours \$450.00 Per Setup hour Product Level 88,400 2 Number of product \$44,200.00 Per Product General factory 73,100 \$170,000 Direct labor dollar \$0.43 Per DH\$ 612,000

2-b) Unit Product Cost using activity rates

 EX300 TX500 Direct materials \$371,325 \$167,550 Direct labor \$125,000 \$45,000 Manufacturing overhead cost (Refer note 1) \$290,200 \$321,800 Total manufacturing costs \$786,525 \$534,350 Units Produced 65,000 Units 13,000 Units Unit Product Cost (Total Manufacturing Cost / Units Produced) \$12.10 \$41.10

Note 1 – Allocated Manufacturing Overheads based on activities performed

For EX300

 Activity Activity Performed in EX300 Activity Rate Total allocated cost Matching 95,000 \$1.55 \$147,250 Setups 100 \$450.00 \$45,000 Product Level 1 \$44,200.00 \$44,200 General factory 125,000 \$0.43 \$53,750 Total \$290,200

FOR TX500

 Activity Activity Performed in TX500 Activity Rate Total allocated cost Matching 65,000 \$1.55 \$100,750 Setups 350 \$450.00 \$157,500 Product Level 1 \$44,200.00 \$44,200 General factory 45,000 \$0.43 \$19,350 Total \$321,800