For many years, Sinclair Graphic Design has provided design and digital-printing services for indoor banners. The nylon banners, which come in a standard size, are used for a variety of purposes, including trade shows, sporting events, and other promotional activities. Three years ago, the company introduced a second printing and production service for outdoor banners that has become increasingly popular. The outdoor banners are a more complex product than the indoor banners, requiring weatherproof vinyl materials and a different printing process to improve the visibility of the text and graphics content. Moreover, outdoor banners are printed in smaller production runs because of less frequent orders; the setup of the printing equipment takes longer; and, since higher durability is needed to withstand the elements, more quality inspections are needed. Under the traditional costing approach, overhead costs are assigned to the products on the basis of direct labour-hours. Despite the introduction of the new outdoor banners, profits have declined steadily over the past three years. Management is beginning to believe that the company's costing system may be at fault. Unit costs for materials and labour for the two products follow: Indoor Outdoor Banners Banners $32.60 $ 57 Direct materials $14.50 Direct labour ($19 per hour) 19 Management estimates that the company will incur $1,920,000 in overhead costs during the current year and that 16,000 indoor banners and 3,200 outdoor banners will be produced and sold. Required: 1-a. Compute the predetermined overhead rate assuming that the company continues to apply overhead cost to products on the basis of direct labour-hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per direct labour hour
For many years, Sinclair Graphic Design has provided design and digital-printing services for indoor banners. The nylon banners, which come in a standard size, are used for a variety of purposes, including trade shows, sporting events, and other promotional activities. Three years ago, the company introduced a second printing and production service for outdoor banners that has become increasingly popular. The outdoor banners are a more complex product than the indoor banners, requiring weatherproof vinyl materials and a different printing process to improve the visibility of the text and graphics content. Moreover, outdoor banners are printed in smaller production runs because of less frequent orders; the setup of the printing equipment takes longer; and, since higher durability is needed to withstand the elements, more quality inspections are needed. Under the traditional costing approach, overhead costs are assigned to the products on the basis of direct labour-hours. Despite the introduction of the new outdoor banners, profits have declined steadily over the past three years. Management is beginning to believe that the company's costing system may be at fault. Unit costs for materials and labour for the two products follow: Indoor Outdoor Banners Banners $32.60 $ 57 Direct materials $14.50 Direct labour ($19 per hour) 19 Management estimates that the company will incur $1,920,000 in overhead costs during the current year and that 16,000 indoor banners and 3,200 outdoor banners will be produced and sold. Required: 1-a. Compute the predetermined overhead rate assuming that the company continues to apply overhead cost to products on the basis of direct labour-hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per direct labour hour
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:For many years, Sinclair Graphic Design has provided design and digital-printing services for indoor banners. The nylon banners,
which come in a standard size, are used for a variety of purposes, including trade shows, sporting events, and other promotional
activities. Three years ago, the company introduced a second printing and production service for outdoor banners that has become
increasingly popular. The outdoor banners are a more complex product than the indoor banners, requiring weatherproof vinyl
materials and a different printing process to improve the visibility of the text and graphics content. Moreover, outdoor banners are
printed in smaller production runs because of less frequent orders; the setup of the printing equipment takes longer; and, since higher
durability is needed to withstand the elements, more quality inspections are needed. Under the traditional costing approach, overhead
costs are assigned to the products on the basis of direct labour-hours.
Despite the introduction of the new outdoor banners, profits have declined steadily over the past three years. Management is
beginning to believe that the company's costing system may be at fault. Unit costs for materials and labour for the two products follow:
Indoor
Outdoor
Banners
Banners
$14.50
$
$32.60
%$4
Direct materials
Direct labour ($19 per hour)
19
57
Management estimates that the company will incur $1,920,000 in overhead costs during the current year and that 16,000 indoor
banners and 3,200 outdoor banners will be produced and sold.
Required:
1-a. Compute the predetermined overhead rate assuming that the company continues to apply overhead cost to products on the basis
of direct labour-hours. (Round your answer to 2 decimal places.)
Predetermined overhead rate
per direct labour hour
Transcribed Image Text:1-b. Using this rate and other data from the problem, determine the unit product cost of each product. (Round your answers to 2
decimal places.)
Indoor
Outdoor
Banners
Banners
Unit product cost
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