Exam 4: Activity-Based Costing and Analysis

Outer Limits, Inc. produces fencing units which require two processes, A and B, to complete. The best-selling type of fence is made of PVC. Information related to the 8,000 units of pvc fencing produced annually is shown below. Direct materials \ 450,000 Direct labor Department A (5,000 DLH x \ 23 per DLH) \ 115,000 Department B (4,000 DLH x \ 25 per DLH) \ 100,000 Machine hours Department A 2,000 Department B 3,000 Outer Limits' total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on machine hours in department A and direct labor hours in department B. Department A Department B Direct labor hours 9,000 7,000 Machine hours 6,500 13,000 Manufacturing overhead costs \ 54,600 \ 67,060 Determine the total amount of overhead assigned to each unit of PVC fencing.

The cost object of the plantwide overhead rate method is:

Freeze Frame, Inc. produces cameras that require three processes, A, B, and C, to complete. Digital camera model #789 is the best-selling of all the many types of cameras produced. Information related to the 550,000 units of digital camera model #789 produced annually is shown below: Freeze Frame's total expected overhead costs and related overhead data are shown in the following table: Department A Department B Department C Direct labor hours 90,000 75,000 42,000 Machine hours 67,500 135,000 53,200 Manufacturing overhead costs \ 540,000 \ 675,000 \ 399,000 a. Compute a departmental overhead rate for department A based on machine hours. b. How much overhead is associated with model 789 from department A? c. Compute a departmental overhead rate for department B based on direct labor hours. d. How much overhead is associated with model 789 from department B? e. Compute a departmental overhead rate for department C based on machine hours. f. How much overhead is associated with model 789 from department C? g What is the per unit cost of the 550,000 units of model 789?