Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter 4, Problem 11E

1.

To determine

Overhead cost per unit for each product line.

1.

Expert Solution
Check Mark

Explanation of Solution

Table showing total departmental overhead cost of model 145 and model 212:

Activity Overhead rate ($) Value of activity driver of model 145 Value of activity driver for model 212 Overhead cost of model 145 ($) ( Rate×Value ) Overhead cost of model 212 ($) ( Rate×Value )
Changeover 625.0 400 400 250,000 250,000
Machining 46.5 1,800 4,200 83,700 195,300
Setups 1,875.0 60 60 112,500 112,500
Welding 60.0 800 2,200 48,080 132,220
Inspecting 300.0 400 300 120,000 90,000
Reworks 250.0 160 140 40,000 35,000
Purchasing 300.0 300 150 90,000 45,000
Space 6.4 1,500 3,500 9,600 22,400
Utilities 13.0 1,500 3,500 19,500 45,500
Total overhead cost 773,380 927,920
Table(1)

Formula to compute overhead cost per unit is,

   Overheadcostperunit= Totaloverheadcost Totalunitsproduced

Model 145

Given,
Total units produced are 1,500.

Substitute 1,500 units for produced units and $773,380 for total overhead cost in the formula.

   Overheadcostperunit= $773,380 1,500 units =$515.59

Model 212

Given,
Totalunits produced are 3,500.

Substitute 3,500 units for produced units and $927,920 for total overhead cost in the formula.

   Overheadcostperunit= $927,920 3,500 units =$265.12

Hence, overhead cost per unit for product 145 is $515.59 and for product 212 is $265.12.

Working notes:

Formula to calculate departmental overhead rate is,

   Departmentaloverheadrate= Budgetedoverheadcost Budgetedactivitylevel

Calculation of overhead rate for changeover activity,

   Overheadrate= $5,00,000 800 =$625.0

Calculation of overhead rate for machining activity,

   Overheadrate= $279,000 6,000 =$46.5

Calculation of overhead rate for setups activity,

   Overheadrate= $225,000 120 =$1,875.0

Calculation of overhead rate for welding activity,

   Overheadrate= $180,300 3000 =$60.1

Calculation of overhead rate for inspecting activity,

   Overheadrate= $210,000 700 =$300.0

Calculation of overhead rate for rework activity,

   Overheadrate= $75,000 300 =$250.0

Calculation of overhead rate for purchasing activity,

   Overheadrate= $135,000 450 =$300.0

Calculation of overhead rate for providing space activity,

   Overheadrate= $32,000 5,000 =$6.4

Calculation of overhead rate for providing utility activity,

   Overheadrate= $65,000 5,000 =$13.0

2.

To determine

Total cost per unit for each product line.

2.

Expert Solution
Check Mark

Explanation of Solution

Formula to compute total cost per unit is,

   Perunitcost=Directmaterialandlabourcostperunit+Overheadcostperunit

Model 145

Given,
Direct labor and material cost per unit is $250.
Overhead cost per unit is $515.59.

Substitute $250 for direct labor and material cost per unit and $515.59 for overhead cost per unit in the formula.

   Totalperunitcost=$250+$515.59 =$765.59

Model 212

Given,
Direct labor and material cost per unit is $180.
Overhead cost per unit is $265.12.

Substitute $180 for direct labor and material cost per unit and $265.12 for overhead cost per unit in the formula.

   Totalperunitcost=$180+$265.12 =$445.12

Hence, total cost per unit for product 145 is $765.59 and for product 212 is $445.12.

3.

To determine

Profit or loss per unit for each model.

3.

Expert Solution
Check Mark

Explanation of Solution

Formula to compute profit or loss per unit is,

   Profitorlossperunit=MarketpriceTotalcost

Model 145

Given,
Market price per unit is $820.
Total cost per unit is $765.59.

Substitute $820 for market price per unit and $765.59 for total cost per unit in the formula.

   Profitorlossperunit=$820$765.59 =$54.41

Model 212

Given,
Market price per unit is $480.
Total cost per unit is $445.12.

Substitute $480 for market price per unit and $445.12 for total cost per unit in the formula.

   Profitorlossperunit=$480$445.12 =$34.88

Hence, profit per unit for product 145 is $54.41 andfor product 212 is $34.88.

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Chapter 4 Solutions

Managerial Accounting

Ch. 4 - What is a cost object?Ch. 4 - Explain why a single plantwide overhead rate can...Ch. 4 - Why are multiple departmental overhead rates more...Ch. 4 - Prob. 9DQCh. 4 - Prob. 10DQCh. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - Prob. 13DQCh. 4 - Prob. 14DQCh. 4 - 15. What are the four activity levels associated...Ch. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 18DQCh. 4 - Prob. 1QSCh. 4 - Prob. 2QSCh. 4 - Prob. 3QSCh. 4 - Prob. 4QSCh. 4 - Prob. 5QSCh. 4 - Prob. 6QSCh. 4 - Prob. 7QSCh. 4 - Prob. 8QSCh. 4 - Plant wide rate method P1 A manufacturer uses...Ch. 4 - Prob. 10QSCh. 4 - Prob. 11QSCh. 4 - Prob. 12QSCh. 4 - Prob. 13QSCh. 4 - Prob. 14QSCh. 4 - Prob. 15QSCh. 4 - Prob. 16QSCh. 4 - Exercise 17-17 Identifying activity levels C3...Ch. 4 - Prob. 2ECh. 4 - Exercise 17-1 Computing Plantwide overhead rates...Ch. 4 - Prob. 4ECh. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Exercise 17-5 Departmental overhead rates P2 Refer...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Prob. 15ECh. 4 - Prob. 16ECh. 4 - Exerciser 17-14 Activity-based costing P3 A2...Ch. 4 - Prob. 18ECh. 4 - Problem 17-1A Comparing costs using ABC with the...Ch. 4 - Prob. 2PSACh. 4 - Prob. 3PSACh. 4 - Prob. 4PSACh. 4 - Prob. 5PSACh. 4 - Prob. 1PSBCh. 4 - Prob. 2PSBCh. 4 - Prob. 3PSBCh. 4 - Prob. 4PSBCh. 4 - Prob. 5PSBCh. 4 - Prob. 4SPCh. 4 - Prob. 1AACh. 4 - Prob. 2AACh. 4 - Prob. 3AACh. 4 - Prob. 1BTNCh. 4 - Prob. 2BTNCh. 4 - Accounting professionals who for private companies...Ch. 4 - Prob. 4BTNCh. 4 - Prob. 5BTNCh. 4 - Visit and observe the processes of three different...
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