| PopUp Company produces two types of toasters, basic and deluxe. For the current period, the company reports the following data: |
| | Basic Toaster | Deluxe Toaster |
| Volume | 20,000 units | 5,000 units |
| Machine Hours | 1,000 | 2,400 |
| Batches | 315 | 125 |
| Engineering Modifications | 20 | 50 | | | | |
| Prime Costs | $20,000 | $30,000 |
| Market Price | $25 per unit | $60 per unit |
| Additional Information Follows | | | | | | | | | |
| | | | | | |
| | Costs | Driver |
| Engineering Support | $15,900 | Engineering Modifications |
| Electricity | 25,000 | Machine Hours |
| Setup costs | 33,900 | Batches |
| 1) Compute the manufacturing cost per unit of each toaster using the current unit-based approach. |
| Under this system costs are assigned to the toasters on the basis of machine hours. |
| 2) Compute the manufacturing cost per unit of each toaster using an activy-based costing approach |
| 1) Manufacturing Cost Per Unit Of Each Toaster Using The Current Unit-Based Approach | | | | | | 2) Manufacturing Cost Per Unit Of Each Toaster Using An Activity-Based Costing Approach: |
| Total Overhead Costs | | | | | | Activities | Cost Pool | Cost Driver | Cost Driver Quantity | Cost Driver Rate |
| Engineering Support | $15,900 | | | | | Engineerong Support | $15,900 | Engineering Modifications | 70 | $227.14 | per engineering modification |
| Electricity | $25,000 | | | | | Electricity | $25,000 | Machine Hours | 3,400 | $7.35 | per machine hour |
| Setup Costs | $33,900 | | | | | Setup Costs | $33,900 | Batches | 440 | $77.05 | per batch |
| | $74,800 |
| | | | | | | Item Cost | | | Basic Toaster Cost | | | Deluxe Toaster Cost |
| Total Machine Hours For Both Types Of Toasters |
| | | | | | | A. Prime Cost | | | | | $20,000.00 | | | $30,000.00 |
| Basic Toaster | 1000 | Machine Hours | | | | B. Manufacturing Overhead | | | Cost Driver Quantity | Activity Based Cost | | Cost Driver Quantity | Activity Based Cost |
| Deluxe Toaster | 2400 | Machine Hours | | | | Engineering Support ($227.14 per engineering modification) | | | 20 | $4,542.86 | | 50 | $11,357.14 |
| | 3400 | | | | | Electricity ($7.35 per machine hour) | | | 1,000 | $7,352.94 | | 2,400 | $17,647.06 |
| | | | | | | Setup Costs ($77.05 per batch) | | | 315 | $24,269.32 | | 125 | $9,630.68 |
| Overhead Absorption Rate Per Machine Hour | | | | | | Total Manufacturing Overhead | | | | | $36,165.12 | | | $38,634.88 |
| | | | | | | C. Total Manufacturing Cost (A+B) | | | | | $56,165.12 | | | $68,634.88 |
| Total overhead costs/Total machine hours for both types of toasters | | | | | | D. Total Number Of Units Produced | | | | | 20,000 | | | 5,000 |
| $74,800 | | | | | | E. Manufacturing Cost Per Unit (C/D) | | | | | $2.81 | | | $13.73 |
| 3400 |
| $22 | per machine hour |
| Manufacturing Cost Per Unit For Basic Toaster |
| Total manufacturing cost of Basic Toaster: |
| Prime Costs | | $20,000 |
| Total Overhead Costs Allocated | (1000 x $22) | $22,000 |
| | | $42,000 |
| Manufacturing cost per unit = Total manufacturing cost/Number of units |
| Manufacturing cost per unit = | $42,000 |
| | 20,000 |
| | $2.10 | per unit |
| Manufacturing Cost Per Unit For Deluxe Toaster |
| Total manufacturing cost of Deluxe Toaster: |
| Prime Costs | | $30,000 |
| Total Overhead Costs Allocated | (2,400 x $22) | $52,800 |
| | | $82,800 |
| Manufacturing cost per unit = Total manufacturing cost/Number of units |
| Manufacturing cost per unit = | $82,800 |
| | 5,000 |
| | $16.56 | per unit |
Tico
Week2WritingProject.xlsx
