Remi0809
Oct 16, 2011, 02:29 PM
I need help setting up the below problem.
Shear Image Company budgeted $7,200,000 of manufacturing overhead for the current year, and 50,000 hours of direct labor (cost of $60/hour). Production of Product X (100,000 units) consumed $200,000 of direct materials, and 8,000 direct labor hours.
Assume that Shera Image uses an ABC system, with three cost drivers: machine hours, materials handling, and setups. Of the total overhead cost, 55% is in the machine hour pool (40,000 budgeted hours), 25% is in the materials pool (allocated based on dollars of raw materials used ($1,600,000 total)), and 20% in the setup pool (100 budgeted setups). In addition to the materials and labor listed above, Product X used 5,500 machine hours and 14 setups. Compute the unit cost of Product X under the ABC system.
My Work Below:
Product X
Direct Material 200,000 (100,000 units)
Direct Labor 60/hr (50,000 hours) 8,000
Manufacturing Overhead 7,200,000
Machine Hours 0.55 40,000 budgeted hours)
Material Handling 0.25 ($ of raw material used $1,600,000)
Setup pool 0.02 (100 budgeted setup)
Total Overhead Per Unit
At this point, I am lost with the last sentence about the additional 5,500 machine hours used by product x. I might have the whole setup wrong. Just not sure. Any assistance would be appreciated.
Jesse
Shear Image Company budgeted $7,200,000 of manufacturing overhead for the current year, and 50,000 hours of direct labor (cost of $60/hour). Production of Product X (100,000 units) consumed $200,000 of direct materials, and 8,000 direct labor hours.
Assume that Shera Image uses an ABC system, with three cost drivers: machine hours, materials handling, and setups. Of the total overhead cost, 55% is in the machine hour pool (40,000 budgeted hours), 25% is in the materials pool (allocated based on dollars of raw materials used ($1,600,000 total)), and 20% in the setup pool (100 budgeted setups). In addition to the materials and labor listed above, Product X used 5,500 machine hours and 14 setups. Compute the unit cost of Product X under the ABC system.
My Work Below:
Product X
Direct Material 200,000 (100,000 units)
Direct Labor 60/hr (50,000 hours) 8,000
Manufacturing Overhead 7,200,000
Machine Hours 0.55 40,000 budgeted hours)
Material Handling 0.25 ($ of raw material used $1,600,000)
Setup pool 0.02 (100 budgeted setup)
Total Overhead Per Unit
At this point, I am lost with the last sentence about the additional 5,500 machine hours used by product x. I might have the whole setup wrong. Just not sure. Any assistance would be appreciated.
Jesse