Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 directlabor-hours.The company's total manufacturing overhead for the year is expected to be $1,632,000.Required:1. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If thismethod is followed, how much overhead cost would be applied to each product? Compute both the overhead cost per unit andthe total amount of overhead cost that would be applied to each product. (In other words, how much overhead cost is applied toa unit of Product H? Product L? How much overhead cost is applied in total to all the units of Product H? Product L?)2. Management is considering an activity-based costing system and would like to know what impact this change might have onproduct costs. For purposes of discussion, it has been suggested that all of the manufacturing overhead be treated as aproduct-level cost. The total manufacturing overhead would be divided in half between the two products, with $816,000assigned to Product H and $816,000 assigned to Product L.If this suggestion is followed, how much overhead cost per unit would be assigned to each product?3. Explain the impact on unit product costs of the switch in costing systems.

Name: Pacifica Industrial Products Corporation makes two products, Product
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Description: Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 directlabor-hours.The comp

1. Computation of Budgeted Total direct Labor Hours: Particulars Product H Product L Budgeted…

Business

Accounting

labor-hours. ompany's total manufacturing overhead for the year is expected to be $ Tred: ne company currently applies manufacturing overhead to products usin ethod is followed, how much overhead cost would be applied to each p e total amount of overhead cost that would be applied to each product. init of Product H? Product L? How much overhead cost is applied in to anagement is considering an activity-based costing system and would oduct costs. For purposes of discussion, it has been suggested that all c

labor-hours. ompany's total manufacturing overhead for the year is expected to be $ Tred: ne company currently applies manufacturing overhead to products usin ethod is followed, how much overhead cost would be applied to each p e total amount of overhead cost that would be applied to each product. init of Product H? Product L? How much overhead cost is applied in to anagement is considering an activity-based costing system and would oduct costs. For purposes of discussion, it has been suggested that all c

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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