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Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $2,138,400 and 42,400 hours, respectively. Information about the company's products follows. Regular- Estimated production volume: 2,200 units Direct materials cost: $36 per unit Direct labor per unit: 4 hours at $23 per hour Deluxe- Estimated production volume: 5,600 units Direct materials cost: $50 per unit Direct labor per unit: 6 hours at $23 per hour Fairchild's overhead of $2,138,400 can be identified with three major activities: order processing ($254,000), machine processing ($1,580,800), and product inspection ($303,600). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Orders Machine Hours Inspection Processed Worked Hours 16,800 24,800 Regular 240 5,600 Deluxe 260 7,600 Total 500 41,600 13,200 Required: A. Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system. B. Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained. (Round your intermediate calculations and final answers to 2 decimal places.) C. How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted? (Round your intermediate calculations and final answers to 2 decimal places.)

Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $2,138,400 and 42,400 hours, respectively. Information about the company's products follows. Regular- Estimated production volume: 2,200 units Direct materials cost: $36 per unit Direct labor per unit: 4 hours at $23 per hour Deluxe- Estimated production volume: 5,600 units Direct materials cost: $50 per unit Direct labor per unit: 6 hours at $23 per hour Fairchild's overhead of $2,138,400 can be identified with three major activities: order processing ($254,000), machine processing ($1,580,800), and product inspection ($303,600). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Orders Machine Hours Inspection Processed Worked Hours 16,800 24,800 Regular 240 5,600 Deluxe 260 7,600 Total 500 41,600 13,200 Required: A. Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system. B. Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained. (Round your intermediate calculations and final answers to 2 decimal places.) C. How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted? (Round your intermediate calculations and final answers to 2 decimal places.)

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
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A. Order processing 508 per OP Machine processing $ 38 per MH Product inspection $ 23 per IH B. Activity-Based Costing Regular Deluxe C. Traditional Costing Regular Deluxe
Transcribed Image Text:A. Order processing 508 per OP Machine processing $ 38 per MH Product inspection $ 23 per IH B. Activity-Based Costing Regular Deluxe C. Traditional Costing Regular Deluxe
Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $2,138,400 and 42,400 hours, respectively. Information about the company's products follows. Regular- Estimated production volume: 2,200 units Direct materials cost: $36 per unit Direct labor per unit: 4 hours at $23 per hour Deluxe- Estimated production volume: 5,600 units Direct materials cost: $50 per unit Direct labor per unit: 6 hours at $23 per hour Fairchild's overhead of $2,138,400 can be identified with three major activities: order processing ($254,000), machine processing ($1,580,800), and product inspection ($303,600). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. ETTI Orders Machine Hours Inspection Processed Worked Hours Regular 240 16,800 5,600 Deluxe 260 24,800 7,600 Total 500 41,600 13,200 Required: A. Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system. B. Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained. (Round your intermediate calculations and final answers to 2 decimal places.) C. How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted? (Round your intermediate calculations and final answers to 2 decimal places.)
Transcribed Image Text:Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labor hours. Anticipated overhead and direct labor time for the upcoming accounting period are $2,138,400 and 42,400 hours, respectively. Information about the company's products follows. Regular- Estimated production volume: 2,200 units Direct materials cost: $36 per unit Direct labor per unit: 4 hours at $23 per hour Deluxe- Estimated production volume: 5,600 units Direct materials cost: $50 per unit Direct labor per unit: 6 hours at $23 per hour Fairchild's overhead of $2,138,400 can be identified with three major activities: order processing ($254,000), machine processing ($1,580,800), and product inspection ($303,600). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. ETTI Orders Machine Hours Inspection Processed Worked Hours Regular 240 16,800 5,600 Deluxe 260 24,800 7,600 Total 500 41,600 13,200 Required: A. Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system. B. Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained. (Round your intermediate calculations and final answers to 2 decimal places.) C. How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labor hours? Which of the two products would be undercosted by this procedure? Overcosted? (Round your intermediate calculations and final answers to 2 decimal places.)
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