 Ask Remember Me? katies_space Posts: 1, Reputation: 1 New Member #1 Mar 4, 2011, 06:25 PM
Predetermined overhead rate and product margins Model X100 and Model X200
Model X100 sells for \$120 per unit whereas Model X200 offers advanced features and sells for \$500 per unit. Management expects to sell 50,000 units of Model X100 and 5,000 units of Model X200 next year. The direct material cost per unit is \$50 for Model X100 and \$220 for Model X200. The company's total manufacturing overhead for the year is expected to be \$1,995,000. A unit of Model X100 requires 2 direct labor-hours and a unit of Model X200 requires 5 direct labor-hours. The direct labor wage rate is \$20 per hour.

Requirement 1

a) Calculate the predetermined overhead rate \$

b) Using this traditional approach, compute the product margins for X100 and X200

Model X100 Model X200 Total
Product Margin \$ \$ \$

Requirement 2:
Management is considering an activity-based costing system and would like to know what impact this would have on product costs. Preliminary analysis suggests that under activity-based costing, a total of \$1,000,000 in manufacturing overhead cost would be assigned to Model X100 and a total of \$600,000 would be assigned to Model X200. In addition, a total of \$150,000 in nonmanufacturing overhead would be applied to Model X100 and a total of \$350,000 would be applied to Model X200. Using the activity-based costing approach, compute the product margins for X100 and X200.

Model X100 Model X200 Total
Product Margin \$ \$ \$

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