Business, 01.02.2021 20:30 Domi0129

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below. Activity Cost Cost Driver
Material handling $225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated machinery 840,000 Machine hours
Finishing 170,000 Direct labor hours
Packaging 170,000 Orders shipped
Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe
Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per unit 10 15 25
Machine hours per unit 1 3 5
Labor hours per unit 2 2 2

Required:
a. What is Barnett's pool rate for the material-handling activity?
b. Under Barnett's activity-based costing system, what is the per-unit overhead cost of Economy?

Answers: 3

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Answer from: AT3P

Solution :

Particulars Economy Standard Delux Total

Units produced (a) 10000 5000 2000 17000

Orders shipped (b) 1000 500 200 1700

No. of orders per unit (c) 10 15 25

Total no. of parts (c)x(a) 100000 75000 50000 225000

Machine hrs per unit (d) 1 3 5

Total machines hrs (d)x(a) 10000 15000 10000 35000

Lab hrs per unit (e) 2 2 2

Total lab hrs (e)x(a) 20000 10000 4000 34000

Pool rate for material handling activity $=\frac{\text{total material handling cost}}{\text{total no. of parts produced}}$

$=\frac{225000}{225000}$

= $ 1

a). Material handling cost per part $=\frac{\text{total material handling cost}}{\text{total no. of parts produced}}$

$=\frac{225000}{225000}$

= $ 1

b). Material insertion cost per part $=\frac{\text{total material insertion cost}}{\text{total no. of parts produced}}$

$=\frac{2475000}{225000}$

= $ 11

c). Cost per machine hours $=\frac{\text{total machine cost}}{\text{total machine hours}}$

$=\frac{840000}{35000}$

= $ 24

d). Cost per labor hours $=\frac{\text{total finishing cost}}{\text{total labor hours}}$

$=\frac{170000}{34000}$

= $ 5

e). Cost per unit shipped $=\frac{\text{total packaging cost}}{\text{total no. of units shipped}}$

$=\frac{17000}{1700}$

= $ 10

Cost per unit overhead = (1 x 10) + (11 x 10) + (24 x 1) + (5 x 2) + (10 x 1)

= $ 164

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Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe....

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