XYZ Co. makes two products -- Model V700 and Model V800. Model V800 offers advanced features and is sold for a higher price than Model V700. Management expects to manufacture 10,000 units of Model V700 and 5,000 units of Model V800 next year. The company's total manufacturing overhead for the year is expected to be $720,000. A unit of Model V700 requires 0.2 direct labor hours and a unit of Model V800 requires 0.4 direct labor hours

a) The company currently applies manufacturing overhead to products using direct labor hours as the allocation base. Calculate the predetermined overhead rate

Predetermined overhead rate =

b) How much overhead cost would be applied to each product in total and and per unit?

V700V800Total overhead applied Overhead per unit

c) Management is considering an activity-based costing system and would like to know what impact this would have on product costs. Preliminary analysis suggests that under activity: -based costing, a total of $390,000 in machine related costs would be assigned to Model V700 and a total of $270,000 would be assigned to Model V800. In addition, a total of $20, 000 in other manufacturing costs would be applied to Model V700 and a total of $40 000 would be applied to Model V800. If this method is used, how much overhead cost would be applied to each product in total and per unit?

Answer rating: 100% (QA)

a To calculate the predetermined overhead rate you can use the following formula Predetermined Overh... View the full answer