Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring one hour of direct labour time per unit to manufacture compared to one-half hour of direct labour time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labour-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labour are: Direct material Direct labour Product S Product W $ 10 $ 24 8 12 Required (show your calculations): a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued Total Cost Product S $ 200,000 800 43,500 500 104,000 152,500 $ 500,000 3,000 860 Total Activity Product W 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (12 marks) c. Explain why the unit product cost is likely to differ between the traditional costing approach and activity-based costing approach. Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring one hour of direct labour time per unit to manufacture compared to one-half hour of direct labour time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labour-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labour are: Direct material Direct labour Product S Product W $ 10 $ 24 8 12 Required (show your calculations): a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued Total Cost Product S $ 200,000 800 43,500 500 104,000 152,500 $ 500,000 3,000 860 Total Activity Product W 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (12 marks) c. Explain why the unit product cost is likely to differ between the traditional costing approach and activity-based costing approach. Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring one hour of direct labour time per unit to manufacture compared to one-half hour of direct labour time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labour-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labour are: Direct material Direct labour Product S Product W $ 10 $ 24 8 12 Required (show your calculations): a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued Total Cost Product S $ 200,000 800 43,500 500 104,000 152,500 $ 500,000 3,000 860 Total Activity Product W 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (12 marks) c. Explain why the unit product cost is likely to differ between the traditional costing approach and activity-based costing approach. Etihad Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring one hour of direct labour time per unit to manufacture compared to one-half hour of direct labour time for Product S. Product W is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labour-hours. The company estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of Product W and 60,000 units of Product S during the current year. Unit cost for materials and direct labour are: Direct material Direct labour Product S Product W $ 10 $ 24 8 12 Required (show your calculations): a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks) b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Purchase orders issued Machine-hours required Maintenance requests issued Total Cost Product S $ 200,000 800 43,500 500 104,000 152,500 $ 500,000 3,000 860 Total Activity Product W 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (12 marks) c. Explain why the unit product cost is likely to differ between the traditional costing approach and activity-based costing approach.
Expert Answer:
Answer rating: 100% (QA)
Requirement a Total Direct Labor Hours Units Produced Lab... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
Students also viewed these accounting questions
-
A travel agency is attempting to enter a market where several competitors currently exist. What are the various customer needs that they should address? How will quality be measured? As the company...
-
Distinguish phishing as an attempt to gain personal or financial information from an individual, usually by posing as a legitimate entity. Emphasize that a variant is spear phishing, a label that...
-
Fry Corporation manufactures two products with the following characteristics. If Frys machine hours are limited to 2,000 per month, determine which product it shouldproduce. Contribution Margin per...
-
In Problems 1158, perform the indicated operation, and write each expression in the standard form a + bi. 3i(-3 + 4i)
-
KPS Communications is planning to bring wireless internet access to the town of Ames, Iowa. Using a geographic information system, KPS has divided Ames into the following 5 by 5 grid. The values in...
-
Derby University sells 4,000 season basketball tickets at $210 each for its 12-game home schedule. Give the entry to record (a) The sale of the season tickets (b) The revenue recognized by playing...
-
Derive a Gibbs sampling scheme for inference in the Hierarchical Dirichlet process. Assume that the base distribution is Gaussian \(\left(H=\mathcal{N}\left(\mu_{0}, \sigma_{0}^{2} ight) ight)\) and...
-
On May 31, the inventory balances of Tog Designs, a manufacturer of high- quality childrens clothing, were as follows: Materials Inventory, $21,360; Work in Process Inventory, $15,112; and Finished...
-
Need to solve. Problem 15-6 Calculating Bond Yield for a T-Bill [LO15-4] Sandra Waterman purchased a 52-week, $1,400 T-bill issued by the U.S. Treasury. The purchase price was $1,398. (a) What is the...
-
1. There was a payroll of $68,100 paid on 3 January; this covered the period of 30 December to 3 January. Write the adjusting entry for this. I know that the debit is to wages expense and the credit...
-
Go to Decision Analysts at https://www.decisionanalyst.com/analytics/marketsegmentation/. Review the market segmentation information, including the video. How is knowledge of market segmentation...
-
Identify and describe the four parts of the AICPA Code of Professional Ethics.
-
What time periods are applicable in Rule 101-Independence to (a) financial interests and (b) business relationships?
-
Identify four problems a researcher might find while screening questionnaires and preparing data for analysis. entered through terminals having touch-screen capabilities, or through the use of a...
-
What actions by a member result in automatic suspension or termination of membership?
-
You are giving a speech asking everyone to consider voting to pass a particular proposition that will increase funding for local schools. Which type of traditional speech is this? A)Forensic...
-
Annual dividends of ATTA Corp grew from $0.96 in 2005 to $1.76 in 2017. What was the annual growth rate?
-
Why might two companies in the same industry have different cost systems?
-
Athena Company has two divisions. Spartan Division, which has an investment base of $8,400,000, produces and sells 450,000 units of a product at a market price of $28 per unit. Its variable costs...
-
Refer to the data for Balance, Inc., in Exercise 3-26. Assume that the company plans to sell 700,000 units per month. Consider requirements (b), (c), and (d) independently of each other. Required a....
-
At http://ftc.gov, the Federal Trade Commission provides information on enforcement cases it has brought against franchisors who violate FTC rules. Do you see a pattern? Are some violations more...
-
1. Michael Ferns incorporated Erin Homes, Inc., to manufacture mobile homes. He issued himself a stock certificate for 100 shares for which he made no payment. He and his wife served as officers and...
-
2. CPA QUESTION A corporate stockholder is entitled to which of the following rights? a. Elect officers b. Receive annual dividends c. Approve dissolution d. Prevent corporate borrowing
Study smarter with the SolutionInn App