Precision Manufacturing Incorporated (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 57,000 units of EX300 and 12,200 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines

 

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Precision Manufacturing Incorporated (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 57,000 units of EX300 and 12,200 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor EX300 $363,325 $ 117,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Coat Pool (and Activity Measure) Machining (nachine-hours) Setups (setup hours) Product-level (number of products) Total TX500 $ 159,550 $ 522,875 $ 41,000 $ 158,000 General factory (direct labor dollars) Total manufacturing overhead cost Manufacturing Overhead. $ 214,600 122, 100 69,360 52,140 $ 458,200 EX300 67,000 60 1 $117.000 Activity TX500 61,000 270 1 9:41,000 Total 140,000 Required: -a. Compute the plantwide overhead rate that would be used in the company's conventional cost system. 1-b. Using the plantwide rate, compute the unit product cost for each product. 2-a. Compute the activity rate for each activity cost pool. 2-b. Using the activity rates, compute the unit product cost for each product. 330 2 $150,000

Expert Answer

a. Plantwide overhead rate using direct labor dollars as allocation base: Total manufacturing overhead cost = $458,200 Total direct labor cost = $200, View the full answer