Carlton's Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $8 and a per-unit direct labor cost of $75. It also expects to manufacture 30,000 units of Shapes, which has a per-unit material cost of $12 and a per-unit direct labor cost of $50. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $10.79 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: Machine Setups $67,500 Machine Processing 2,000,000 Material Requisitions 90,000 Total Overhead $2,157,500 The cost driver for each cost pool and its expected activity is shown: Strands Shapes Total Machine Setups 90 180 270 Machine Hours 140,000 60,000 200,000 Parts Requisitions 80 120 200 A. What is the per-unit cost for each product under the traditional allocation method? Round your answers to two decimal places. Strands Shapes Total per unit cost $fill in the blank 1 $fill in the blank 2 B. What is the per-unit cost for each product under ABC costing? Round your answers to two decimal places. Strands Shapes Total cost $fill in the blank 3 $fill in the blank 4 C. Compared to ABC costing, was each product's overhead under- or overapplied?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 9PA: Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to...

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Carlton's Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $8 and a per-unit direct labor cost of $75. It also expects to manufacture 30,000 units of Shapes, which has a per-unit material cost of $12 and a per-unit direct labor cost of $50. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $10.79 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown:

Machine Setups $67,500

Machine Processing 2,000,000

Material Requisitions 90,000

Total Overhead $2,157,500

The cost driver for each cost pool and its expected activity is shown:

Strands Shapes Total

Machine Setups 90 180 270

Machine Hours 140,000 60,000 200,000

Parts Requisitions 80 120 200

A. What is the per-unit cost for each product under the traditional allocation method? Round your answers to two decimal places.

Strands Shapes

Total per unit cost $fill in the blank 1 $fill in the blank 2

B. What is the per-unit cost for each product under ABC costing? Round your answers to two decimal places.

Strands Shapes

Total cost $fill in the blank 3 $fill in the blank 4

C. Compared to ABC costing, was each product's overhead under- or overapplied?

D. By how much was overhead under- or overapplied for each product? Round your answers to two decimal places.

Overhead Amounts

Strands

$fill in the blank 6

Shapes

$fill in the blank 8

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