Sand Company production managers noted that the SDP product is much harder to produce than the...

 

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Sand Company production managers noted that the SDP product is much harder to produce than the BP product. The SDP product is highly automated and requires product engineers to spend many hours setting the tight specifications and machine tolerances. BP is a standard product which is assembled from purchased parts. The Sand Company Controller felt that the plantwide overhead rate gave misleading cost information and wanted to try ABC. The following information on activities prepared and drivers was developed: Sand Company BP SDP Direct labor hours 90,000 10,000 Units produced 45,000 5,000 Purchase orders 500 300 Machine hours 5,000 15,000 Engineering hours 600 4,400 Prime cost $1,485,000 $190,000 Sand Company Overhead Costs Purchasing $30,000 Machine maintenance and operation 150.000 Engineering 75,000 All other 105,000 Total $360,000 1. Calculate activity rates for the following (If required, round your answers to two decimal places.): Purchasing $ per purchase order Machine maintenance and operation $ per machine hour. Engineering $ per engineering hour. All other overhead $ per direct labor hour. 2. Using the activity rates and drivers from Requirement #1, fill in the applied overhead amounts and total product and unit costs for BP and SDP. (If required, round rates and per unit costs to the nearest cent and round dollar figures to the nearest dollar.) Sand Company BP SDP Total prime cost $1,485,000 $190,000 Applied overhead: Purchasing Machine maintenance and operation Engineering All other Total product cost + number of units + 45,000 - 5,000 Unit cost Sand Company production managers noted that the SDP product is much harder to produce than the BP product. The SDP product is highly automated and requires product engineers to spend many hours setting the tight specifications and machine tolerances. BP is a standard product which is assembled from purchased parts. The Sand Company Controller felt that the plantwide overhead rate gave misleading cost information and wanted to try ABC. The following information on activities prepared and drivers was developed: Sand Company BP SDP Direct labor hours 90,000 10,000 Units produced 45,000 5,000 Purchase orders 500 300 Machine hours 5,000 15,000 Engineering hours 600 4,400 Prime cost $1,485,000 $190,000 Sand Company Overhead Costs Purchasing $30,000 Machine maintenance and operation 150.000 Engineering 75,000 All other 105,000 Total $360,000 1. Calculate activity rates for the following (If required, round your answers to two decimal places.): Purchasing $ per purchase order Machine maintenance and operation $ per machine hour. Engineering $ per engineering hour. All other overhead $ per direct labor hour. 2. Using the activity rates and drivers from Requirement #1, fill in the applied overhead amounts and total product and unit costs for BP and SDP. (If required, round rates and per unit costs to the nearest cent and round dollar figures to the nearest dollar.) Sand Company BP SDP Total prime cost $1,485,000 $190,000 Applied overhead: Purchasing Machine maintenance and operation Engineering All other Total product cost + number of units + 45,000 - 5,000 Unit cost

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