Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Model N 800 XL Model N 500 Activity Cost Pool Machine setups Special processing General factory Direct Labor- Hours per Unit 3.0 1.0 Activity Measure Number of setups Machine-hours Direct labor-hours Annual Production 4,000 units 13,000 units Additional information about the company follows: a. Model N 800 XL requires $70 in direct materials per unit, and Model N 500 requires $30. b. The direct labor wage rate is $17 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 Measure Number of setups Machine-hours Direct labor-hours Model N 800 XL 150 Total Direct Labor-Hours 20,000 12,000 12,000 13,000 25,000 Estimated. Overhead Cost $ 520,000 235,000 1,445,000 $ 2,200,000 Expected Activity Model N 500 250 0 13,000 Total 400 20,000 25,000

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Chapter1: Financial Statements And Business Decisions
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Overhead cost per unit of each model?
Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data
regarding the two products follow:
Model N 800 XL
Model N 500
Direct Labor-
Hours per Unit
3.0
1.0
Activity Cost Pool
Machine setups
Special processing
General factory
Annual Production
4,000 units
13,000 units
Activity Measure
Number of setups
Machine-hours
Direct labor-hours
Additional information about the company follows:
a. Model N 800 XL requires $70 in direct materials per unit, and Model N 500 requires $30.
b. The direct labor wage rate is $17 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 Measure
Number of setups
Machine-hours
Direct labor-hours
Saved
Model N 800 XL
150
20,000
12,000
Total
Direct
Labor-Hours
12,000
13,000
25,000
< Prev
Estimated
Overhead Cost
$ 520,000
235,000
1,445,000
$ 2,200,000
Expected Activity
Model N 500
250
0
13,000
6
of 6
D
Total
400
20,000
25,000
Next >
H
Transcribed Image Text:Puget World, Incorporated, manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Model N 800 XL Model N 500 Direct Labor- Hours per Unit 3.0 1.0 Activity Cost Pool Machine setups Special processing General factory Annual Production 4,000 units 13,000 units Activity Measure Number of setups Machine-hours Direct labor-hours Additional information about the company follows: a. Model N 800 XL requires $70 in direct materials per unit, and Model N 500 requires $30. b. The direct labor wage rate is $17 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 Measure Number of setups Machine-hours Direct labor-hours Saved Model N 800 XL 150 20,000 12,000 Total Direct Labor-Hours 12,000 13,000 25,000 < Prev Estimated Overhead Cost $ 520,000 235,000 1,445,000 $ 2,200,000 Expected Activity Model N 500 250 0 13,000 6 of 6 D Total 400 20,000 25,000 Next > H
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