Question

Change the direct labor-hour requirement for the Deluxe model back to 5 hours in cell B10. Assume that the production orders change so that the Deluxe model Will have 230 orders in cell C19 and the Tourist model will have 270 orders in cell D19. The Data area should now look like this:

  

	A	B	C	D	E	F
1	Chapter 3: Applying Excel
2
3	Enter a formula into each of the cells marked with a ? below
4	Review Problem: Activity-Based Costing
5
6	Data
7		Deluxe	Tourist
8	Annual sales in units	2,000	10,000
9	Direct materials per unit	$25	$17
10	Direct labor-hours per unit	5	4
11
12	Direct labor rate	$12	per DLH
13
14		Estimated
15		Overhead	Expected Activity
16	Activities and Activity Measures	Cost	Deluxe	Tourist	Total
17	Labor related (direct labor-hours)	$ 80,000	10,000	40,000	50,000
18	Machine setups (setups)	150,000	3,000	2,000	5,000
19	Production orders (orders)	70,000	230	270	500
20	General factory (machine-hours)	250,000	12,000	28,000	40,000
21		$550,000
22

  

(a)	What is the traditional unit product cost for the Deluxe model after this change?

  

Answer 1

	CALCULATION OF UNIT COSTING AS PER TRADITIONAL METHOD
	Particulars	Delux	Tourist
		(2, 000 Units)	(10,000 Units)
	Direct Material	$25	$17
	Direct Labour	$60	$48
		(5 Hrs X $ 12)	(4 Hrs X $ 12)
	Overhead Cost:	$55	$44
		(5 Hrs X $ 11)	(4 Hrs X $ 11)
	Total Cost =	$140	$109
	CALCULATION OF THE RECOVERY RATE OF THE OVERHEAD
	Total Ovehread =	$5,50,000
	Total Hours
	Delux (2000 Units X 5 Hrs Per Unit)	10000	Hrs
	Tourist (10000 Units X 4 Hrs )	40000	Hrs
	Total Hours =	50000	Hrs
	Recovery Rate = Total Overhead / Total Hours
	Recovery Rate =
	Total Overhead =	$5,50,000
	Divide By	"/" By
	Total Hours =	$50,000	Hrs
	Recovery Rate =	$11.00	Per Unit