Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labour hours to assign its overhead costs. The company has the following estimated and actual data for the coming year: Estimated overhead$2,000,000Expected activity50,000Actual activity (direct labour hours): Deluxe dryer10,000Regular dryer40,000Units produced: Deluxe dryer20,000Regular dryer200,000 Required:Calculate the predetermined plantwide overhead rate and the applied overhead for eachproduct, using direct labour hours.Calculate the overhead cost per unit for each product.What if the deluxe product used 20,000 hours (to produce 20,000 units) instead of 10,000hours (total expected hours remain the same)? Calculate the effect on the profitability of thisproduct line if all 20,000 units are sold, and then discuss the implications of this outcome.

Answered: Seco, Inc., produces two types of…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...

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Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labour hours to assign its overhead costs. The company has the following estimated and actual data for the coming year:

Estimated overhead	$2,000,000
Expected activity	50,000
Actual activity (direct labour hours):
Deluxe dryer	10,000
Regular dryer	40,000
Units produced:
Deluxe dryer	20,000
Regular dryer	200,000

Required:

Calculate the predetermined plantwide overhead rate and the applied overhead for eachproduct, using direct labour hours.
Calculate the overhead cost per unit for each product.
What if the deluxe product used 20,000 hours (to produce 20,000 units) instead of 10,000hours (total expected hours remain the same)? Calculate the effect on the profitability of thisproduct line if all 20,000 units are sold, and then discuss the implications of this outcome.

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