[davidhej]

I'm in a real jam here, I have a problem that I'm going over so that I can prepare for the final and got stuck. Can anyone help me out with this.
I need to compute the predetermined overhead rate and compute the unit product cost of each model.
Here is the info that's in the book:
Ellix Co. manufacturers 2 models of ultra-high fidelity speakers, the x200 and x99 model.
Direct Labor Hours Annual Production Total direct labor-hours
per unit (units)
x200 1.8 5000 9000
x99 0.9 30000 27000
36000
Additional info:
Model x200 requires $72 in direct materials per unit, and model x99 requires $50.
The direct labor wage rate is $10 per hour
The company has always used the direct labor-hours as the base for applying manufacturing overhead cost to products. 3 activity cost pools have been identified as follows:

Activity cost pool Activity measure Estimated Overhead Cost
Machine set-ups # of set ups $360,000
Special processing Machine hours 180,000
General Factory Direct labor-hours 1,260,000
$1,800,000

NOw should I divide the 1.8 mil into the total hours (which is 36000) or should I multiply the $10 per hour by the amount of total direct labor hours (which were 9000 and 27000)
Please help!!

[morgaine300]

The whole point of doing three separate activities is to divide up the costs into those individual activities. The traditional way was to only use direct labor hours. But the new ABC way is going to involve three separate activities, two of which don't involve direct labor hours. So you can't involve the total 1.8 million cause it consists of two things not involving labor.

How much cost is involved in labor? Not 1.8 million. And then you want to divide it by (not into) 36,000 hours. What that does is give you the cost per one hour.

Once you have the cost per one hour, you can then apply it to the two models. i.e. x200 is 9000 hours. Now that you have cost per hour, you can multiply by 9000 hours to see how much applies to that model. Ditto the other model.

The other two activities will work exactly the same way, except that you haven't presented the necessary information here to do them. (You need the # of setups and machine hrs for each model to do that, just like you have labor hours for each model.)

As for the $10 wages -- wages paid to employees isn't the same as the "cost" for labor.