Rounders Company Used the Following Information When Determining the Appropriate

Essay

Rounders Company used the following information when determining the appropriate overhead rates to use in its two production departments: $\begin{array}{lrr}&\text { Fabrication }&\text {Assembly }\\\text { Budgeted overhead } & £ 350,000 & £ 500,000 \\\text { Budgeted activity: } & & \\\text { Direct labour hours (DLH) } & 14,000 & 12,500 \\\text { Machine hours (M H) } & 20,000 & 25,000 \\\text { Units projected } & 7,000 & 4,000\\\\\text { Actual operating results were as follows: }\\ \text { Actual overhead cost } & £ 355,000 & £ 505,000 \\\text { Actual activity: } & & \\\text { Direct labour hours (DLH) } & 13,500 & 13,000 \\\text { Machine hours (M H) } & 19,000 & 27,000\end{array}$
Two of the products in the product line were as follows: $\begin{array}{llc}&\text { Product } 1&\text { Product } 2\\\text { Prime costs } & £ 900,000 & £ 1,200,000 \\\text { Activity: } & & \\\text { Fabrication } & 5,000 \mathrm{DLH} & 6,000 \mathrm{DLH} \\\text { Assembly } & 9,000 \mathrm{MH} & 12,000 \mathrm{MH} \\\text { Units produced } & 7,000 & 4,000\end{array}$
a.Assume that Rounders applies overhead using a plantwide rate based on direct labour hours. Determine the unit cost of Products 1 and 2.
b.Assume that Rounders uses direct labour hours to apply overhead in the Fabrication Department and machine hours to apply overhead in the Assembly Department. Determine the unit cost of Products 1 and 2.