Answer:
1. $260 ; $165 and $225
2. $132.50 and $290
3. Activity Driver Method.
Explanation:
As per the data given in the question,
1)
Overhead rate =(Direct labor + Ordering cost + Machine cost +Receiving) ÷ (Direct labor hour for A + Direct labor hour for B)
= ($480,000 + $360,000 + $840,000 +$400,000) ÷ (6,000+$2,000)
= $260
Model A cost per unit = (Direct material +Setting up)÷Units +(Direct labor hour×Overhead rate÷Units)
=($600,000+$480,000)÷$16,000 +($6,000×$260÷ $16,000)
= $165
Model B cost per unit = ($800,000+$480,000)÷$8,000 +($2,000×$260÷ $8,000)
= $225
2)
Model A cost =((Direct material + direct labor)+(direct labor×no. of setups÷number of setup)+(ordering cost×no. of orders÷machine hours)+(machine costs×no. of orders÷machine hours)+(receiving×receiving hours÷receiving hours)) ÷ Units
= (($600,000+$480,000) + ($480,000×400÷600) + ($360,000×$12,000÷$18,000) +($840,000×$18,000÷$42,000) + ($400,000×3,000÷$10,000)) ÷ $16,000
= $132.50
Model B cost = (($800,000+$480,000) + ($480,000×200÷600) + ($360,000×$12,000÷$18,000) +($840,000×$18,000÷$42,000) + ($400,000×7,000÷$10,000)) ÷ $8,000
= $290
3)
The more accurate cost assignment is produced by Activity Driver Method.
We simply applied the above formulas
