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The Good Sounds Corp. is attempting to get a better estimate of the cost of their products.
As a first step, they are attempting to allocate overhead by defining three activity cost pools and three corresponding cost drivers. They believe that the cost drivers of each of these pools correlate with the costs of that activity pool.
The estimated overhead costs and activity levels for each activity are given as follows:
Activity - Supervision
Cost Driver - Direct Labor $
Estimated OH costs - $60,000
Estimated Activity level - $150,000
Activity data for the two products manufactured by the company at year end are as follows:
Direct Labor $ - (Radios) 120,000 – (CD Players) $500,000
#Inspections – (Radios) $500 – (CD Players) $1,500
Machine Hours – (Radios) $5,000 – (CD Players) $5,000
The following are the direct costs associated with each product and the units manufactured:
Direct Material - (Radios) $1,500,000 – (CD Players) $500,000
Direct Labor – (Radios) $120,000 – (CD Players) $30,000
Units Produced – (Radios) $20,000 – (CD Players) $10,000
What amount of overhead will be applied to CD Players?
What is the unit cost of a CD Player?
What is the unit cost of a Radio?
