Question

Tonopah Corporation (TC) wants to move from a job costing system to an activity based costing (ABC) system. For 2019, Tonopah Corporation has budgeted sales of 25,000 units for product beta and 125,000 units for product gamma. TC estimates total manufacturing overhead to be $6,000,000. TC’s traditionally applied manufacturing overhead to products based on direct labor hours. Product beta and product gamma both require 2.75 hours of direct labor to complete. Unit costs for materials and labor are as follows:

Direct materials product beta = $75; product gamma = $25. Direct labor product beta = $20; product gamma = $20.

1) What is the POHR based on labor hours?

2) Using direct labor hours as a base, what is the unit product costs? (8 pts)

Beta Gamma

Direct Materials

Direct Labor

Manuf Overhead

Unit Product Costs

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.