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9966 [12]
2 years ago
15

VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. The deluxe model is a multi-format p

rogressive-scan DVD player with networking capability, Dolby digital, and DTS decoder. The standard model’s primary feature
is progressive-scan. Annual production is 50,000 units for the deluxe and 20,000 units for
the standard.
Business
1 answer:
n200080 [17]2 years ago
4 0

The computation of the total cost per unit for each product is as follows:

                                       Standard      Deluxe

Direct materials per unit   $11.00        42.00

Direct labor per unit           18.00         18.00

Overhead cost per unit     14.57           15.17

Total cost per unit        $43.57        $74.17

<h3>What is the ABC costing system?</h3>

The ABC (Activity-based costing) costing system is a costing method that:

  • Identifies activities in an organization.
  • Assigns the overhead cost of each activity to all products and services.
  • Cost assignment is based on the actual consumption by each.

The ABC costing system is not like the traditional costing system that uses a single plantwide rate as the overhead rate based on a single cost driver.

<h3>Question Completion:</h3>

Both products require 2 hours of direct labor for completion. Therefore, total annual direct labor hours are 140,000 [2 hrs. × (20,000 + 50,000)]. The expected annual manufacturing overhead is $1,050,000. Thus, the predetermined overhead rate is $7.50 ($1,050,000 ÷ 140,000) per direct labor hour. The direct materials cost per unit is $42 for the deluxe model and $11 for the standard model. The direct labor cost is $18 per unit for both the deluxe and the standard models.

The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.

Required

Compute the total cost per unit for each product under ABC.

<h3>Data and Calculations:</h3>

Activity Cost Pool  Cost Driver  Estimated  Expected Use   Expected Use

                                                   Overhead  of Cost Drivers  of Drivers by

                                                                                                       Product

                                                                                              Standard Deluxe

Purchasing         Orders             $ 126,000            400             100         300

Receiving          Pounds                 30,000       20,000         4,000    16,000

Assembling      Number of parts 444,000       74,000       20,000   54,000

Testing              Number of tests  115,000       23,000        10,000   13,000

Finishing           Units                   140,000        70,000       20,000 50,000

Packing & shipping Pounds       195,000        80,000        18,000 62,000

Total                                      $1,050,000

Overhead rate per Activity Cost Pool

Activity Cost Pool  Cost Driver  Estimated  Expected Use     Overhead

                                                   Overhead  of Cost Drivers       Rates

Purchasing         Orders             $ 126,000            400              $315 ($126,000/400)

Receiving          Pounds                 30,000       20,000            $1.50 ($30,000/20,000)

Assembling      Number of parts 444,000       74,000           $6.00 ($444,000/74,000)

Testing              Number of tests  115,000       23,000           $5.00 $115,000/23,000)

Finishing           Units                   140,000        70,000           $2.00 ($140,000/70,000)

Packing & shipping Pounds       195,000        80,000           $2.4375 ($195,000/80,000)

Allocation of Overhead per product:

Activity Cost Pool   Overhead  Standard                        Deluxe

Purchasing                 $315     $31,500 (100 x $315)     $94,500 (300 x $315)

Receiving                  $1.50        6,000 (4,000 x $1.5)    24,000 (16,000 x $1.5)

Assembling             $6.00     120,000 (20,000 x $6) 324,000 (54,000 x $6)

Testing                    $5.00      50,000 (10,000x $5)     65,000 (13,000 x $5)

Finishing                 $2.00      40,000 (20,000 x $2)  100,000 (50,000 x $2)

Packing &

shipping Pounds  $2.4375   43,875 (18,000 x $2.4375) 151,125 (62,000 x $2.4375)

Total overhead allocated  $291,375                     $758,625   $1,050,000

Total units produced             20,000                         50,000

Overhead per unit                 $14.57                            $15.17

Learn more about ABC costing system at brainly.com/question/6654166

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