
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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What is the unit production cost for each model?

Transcribed Image Text:ces
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
Model N 800 XL
150
20,000
12,000
Total
Direct
Labor-Hours
Estimated
Overhead Cost
$ 520,000
235,000
1,445,000
$ 2,200,000
< Prev
12,000
13,000
25,000
Expected Activity
Model N 500
250
0
13,000
5
S
6
of 6
tv
#
Total
400
20,000
25,000
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