Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected...

Transcribed Image Text:

Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 31,000 units next year and Product L is expected to sell 6,200 units. A unit of either product requires 0.7 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $2,213,400. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method Is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product. 2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,106,700 assigned to Product H and $1,106,700 assigned to Product L. If this suggestion is followed, how much overhead cost per unit would be assigned to each product? Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 31,000 units next year and Product L is expected to sell 6,200 units. A unit of either product requires 0.7 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $2,213,400. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method Is followed, how much overhead cost per unit would be applied to each product? 1-b. Compute the total amount of overhead cost that would be applied to each product. 2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $1,106,700 assigned to Product H and $1,106,700 assigned to Product L. If this suggestion is followed, how much overhead cost per unit would be assigned to each product?

Answer rating: 100% (QA)

Lets break this down step by step 1a Calculation of overhead cost per unit using direct laborhours a... View the full answer