We were unable to transcribe this imageRequired 1. Assume that the company continues to use direct...

Solution

Puget World Inc

1. Assuming the company uses direct labor hours as the base for applying overhead cost to products,

1. Computation of predetermined overhead:

Predetermined overhead rate = total overhead cost/total direct labor hours

Total overhead cost = $1,885,000

Total direct labor hours = 29,000

Predetermined overhead rate = $1,885,000/29,000 DLH

Predetermined overhead rate = $65 per hour

1. Computation of unit product cost of each model:

	Unit Product Cost
Model N 800 XL	$321
Model N 500	$194

Unit Product Cost -	Model N 800 XL	Model N 500
Direct materials	$60	$20
Direct labor	$66	$44
MOH	$195	$130
Total unit product cost	$321	$194

Direct labor per unit = direct labor rate per hour x number of hours per unit

Model N 800 XL = $22 x 3 DLH = $66

Model N 500 = $22 x 2 DLH = $44

Manufacturing overhead per unit = predetermined overhead per hour x number of hours per unit

Model N 800 XL = $65 x 3 DLH = $195

Model N 500 = $65 x 2 DLH = $130

1. Assuming the Activity Based Costing –

1. Computation of amount of overhead cost to be assigned to each model using the ABC system:

	Unit Product Cost
Model N 800 XL	$382
Model N 500	$176

Unit Product Cost -	Model N 800 XL	Model N 500
Direct materials	$60	$20
Direct labor	$66	$44
MOH	$256	$112
Total unit product cost	$382	$176

Activity	Activity Usage	Estimated Cost	Activity Rate
Machine Setup	250 setups	$320,000	$1,280
Special processing	16,000 machine hours	$260,000	$16.25
General factory	29,000 DLH	$1,305,000	$45

Overhead cost assigned to Model N 800 XL
Activity	Activity Usage	Activity Rate	Activity Cost Assigned
Machine Setups	80 setups	$1,280	$102,400
Special processing	16,000 MH	$16.25	$260,000
General Factory	9,000 DLH	$45	$405,000
Total assigned overhead cost			$767,400
Number of units			3,000 units
overhead assigned per unit			$255.80

  

Overhead cost assigned to Model N 500
Activity	Activity Usage	Activity Rate	Activity Cost Assigned
Machine Setups	170 setups	$1,280	$217,600
Special processing	0	$16.25	$0
General Factory	20,000 DLH	$45	$900,000
Total assigned overhead cost			$1,117,600
Number of units			10,000 units
overhead assigned per unit			$111.76