Question

Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

	Direct Labor- Hours per Unit	Annual Production	Total Direct Labor-Hours
Model N 800 XL	3.0	4,000 units	12,000
Model N 500	1.0	12,000 units	12,000
			24,000

Additional information about the company follows:

a. Model N 800 XL requires $90 in direct materials per unit, and Model N 500 requires $40.

b. The direct labor wage rate is $18 per hour.

c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.

d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Machine setups	Number of setups	$	410,000
Special processing	Machine-hours		190,000
General factory	Direct labor-hours		1,680,000
		$	2,280,000

	Expected Activity
Activity Measure	Model N 800 XL	Model N 500	Total
Number of setups	160	240	400
Machine-hours	20,000	0	20,000
Direct labor-hours	12,000	12,000	24,000

Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

Predetermined overhead rate

per DLH

Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. Compute the unit product cost of each model. (Round your answers to 2 decimal places.)

Model N 800 XL
Model N 500

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Machine setup		per setup
Special processing		per MH
General factory		per DLH

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products. Determine the amount of overhead cost that would be assigned to each model using the activity-based costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

	Model N 800 XL	Model N 500
Overhead cost per unit

Assume that the company decides to use activity-based costing to assign manufacturing overhead cost to products. Compute the unit product cost of each model. (Round your intermediate calculations and final answers to 2 decimal places.)

	Model N 800 XL	Model N 500
Unit product cost

Answer 1