Metalarte Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets, respectively. The following additional data apply: 2,700 inspection hours BRASS CHROME WHITE Projected sales in units 30,000 50,000 40,000 PER UNIT data: Selling price $40 $20 $30 Direct materials $8 $4 $8 Direct labor $15 $3 $9 Overhead cost based on direct labor hours: (traditional system) $12 $3 $9 Hours per 1000-unit batch: Direct labor hours 40 10 30 Machine hours 25 25 10 Setup hours 1.0 0.5 1.0 Inspection hours 30 20 20 Total overhead costs and activity levels for the year are estimated as follows: Activity Overhead costs Activity levels Direct labor hours 2,900 hours Machine hours 2,400 hours Setups $465,500 95 setup hours Inspections $405,000 $870,500 Required: Using the traditional system, determine the operating profit per unit for the brass style of faucet. Determine the activity-cost-driver rate for setup costs and inspection costs. Using the ABC system, for the brass style of faucet: compute the estimated overhead costs per unit. compute the estimated operating profit per unit.

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 2PB: Five Card Draw manufactures and sells 10,000 units of Aces, which retails for $200, and 8,000 units...

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Metalarte Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets, respectively. The following additional data apply:

2,700 inspection hours

	BRASS	CHROME	WHITE
Projected sales in units	30,000	50,000	40,000

PER UNIT data:
Selling price	$40	$20	$30
Direct materials	$8	$4	$8
Direct labor	$15	$3	$9
Overhead cost based on direct labor hours: (traditional system)	$12	$3	$9
Hours per 1000-unit batch:
Direct labor hours	40	10	30
Machine hours	25	25	10
Setup hours	1.0	0.5	1.0
Inspection hours	30	20	20

Total overhead costs and activity levels for the year are estimated as follows:
Activity		Overhead costs	Activity levels
Direct labor hours			2,900 hours
Machine hours			2,400 hours
Setups		$465,500	95 setup hours
Inspections		$405,000
		$870,500