Question

# Crane Visuals produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis...

Crane Visuals produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.

 Activity Pool Department Costs \$297,000 Number of units 955,500 Machine hours 234,000 Change orders 727,500 None \$2,214,000

Other information is as follows:

 Tablets Books 62,500 10,000 \$5.00 \$10 \$4.00 \$8.00 30,000 19,200 150,000 144,000 1,500 2,400

Crane’s managers have gathered the following information about selling and administrative costs.

 Activity Pool Total Cost \$420,000 Pounds shipped 187,500 Number of mailings 168,125 Sales price \$775,625
 Tablets Books 20,000 pounds 40,000 pounds 25,000 100,000 5% of sales price 8.00% of sales price \$40 \$174

Using the information given here, calculate the product margin per unit for Tablets and Books using the traditional costing system. (Round all rates and final answers to 2 decimal places, e.g. 15.25.)

 Predetermined overhead rate = Total Manufacturing overhead cost / Direct labor hours

Total Manufacturing overhead cost = \$2,214,000

Direct Labor hours = 30,000 + 19,200 = 49,200

Predetermined overhead rate = \$2,214,000 / 49,200 direct labor hours = \$45 per direct labor hour

Tablets = 30,000 direct labor hours * \$45 per direct labor hour = \$1,350,000

Books = 19,200 direct labor hours * \$45 per direct labor hour = \$864,000

Tablets = \$1,350,000 / 62,500 Units = \$21.60 per unit

Books = \$864,000 / 10,000 Units = \$86.40 per unit

4. Product Margin per unit

 Particulars Tablets Books Selling price per unit \$40.00 \$174.00 Less: Product cost per unit Direct Material cost per unit \$5.00 \$10.00 Direct Labor cost per unit \$4.00 \$8.00 Overhead cost per unit \$21.60 \$86.40 Product Margin per unit \$9.40 \$69.60

All the best...

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