Question

COMPLETE THE FOLLOWING PROBLEMS. SHOW YOUR WORK. 35. The Sally Nelson Manufacturing Company makes many different products. The following information pertains to one of the company's many products and its estimated manufacturing overhead costs and activities for the year. Information for Product A: Units Produced 2,500 Direct material cost per unit $ 2.10 Direct labor cost per unit $ 2.40 Direct labor hours 400 Production machine setups 6 Engineering changes 2 Estimated manufacturing overhead costs for the factory: Setup costs $ 71,250 Engineering cost 106,400 Other manufacturing overhead cost 63,300 Total manufacturing overhead cost $240,950 Estimated activities for the factory: Number of set-ups 750 Number of engineering changes 400 Total annual direct labor hours 15,000 REQUIRED: A. Calculate the company's manufacturing overhead allocation rates assuming the company uses activity-based costing. (Assume that ""other"" manufacturing overhead costs are allocated based on direct labor hours.) B. Calculate the total cost for product A using activity-based costing for the overhead allocation.

          COMPLETE THE FOLLOWING PROBLEMS. SHOW YOUR WORK.
35.
The Sally Nelson Manufacturing Company makes many different
products. The following information pertains to one of the company's
many products and its estimated manufacturing overhead costs and
activities for the year.
Information for Product A:
Units Produced
2,500
Direct material cost per unit
$ 2.10
Direct labor cost per unit
$ 2.40
Direct labor hours
400
Production machine setups
6
Engineering changes
2
Estimated manufacturing overhead costs for the factory:
Setup costs
$ 71,250
Engineering cost
106,400
Other manufacturing overhead cost
63,300
Total manufacturing overhead cost
$240,950
Estimated activities for the factory:
Number of set-ups
750
Number of engineering changes
400
Total annual direct labor hours
15,000
REQUIRED:
A. Calculate the company's manufacturing overhead allocation
rates assuming the company uses activity-based costing.
(Assume that ""other"" manufacturing overhead costs are
allocated based on direct labor hours.)
B. Calculate the total cost for product A using activity-based
costing for the overhead allocation.

Show more…

COMPLETE THE FOLLOWING PROBLEMS. SHOW YOUR WORK.
35.
The Sally Nelson Manufacturing Company makes many different
products. The following information pertains to one of the company's
many products and its estimated manufacturing overhead costs and
activities for the year.
Information for Product A:
Units Produced
2,500
Direct material cost per unit
2.10
Direct labor cost per unit 2.40
Direct labor hours
400
Production machine setups
6
Engineering changes
2
Estimated manufacturing overhead costs for the factory:
Setup costs
71,250
Engineering cost
106,400
Other manufacturing overhead cost
63,300
Total manufacturing overhead cost240,950
Estimated activities for the factory:
Number of set-ups
750
Number of engineering changes
400
Total annual direct labor hours
15,000
REQUIRED:
A. Calculate the company's manufacturing overhead allocation
rates assuming the company uses activity-based costing.
(Assume that ""other"" manufacturing overhead costs are
allocated based on direct labor hours.)
B. Calculate the total cost for product A using activity-based
costing for the overhead allocation.

Added by Joy K.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Akash M

12/17/2023

Step 1

First, we need to calculate the overhead allocation rates for each activity. Show more…

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COMPLETE THE FOLLOWING PROBLEMS. SHOW YOUR WORK. 35. The Sally Nelson Manufacturing Company makes many different products. Information for Product A: Units Produced: 2,500 Direct material cost per unit: $2.10 Direct labor cost per unit: $2.40 Direct labor hours: 400 Production machine setups: 6 Engineering changes: 2 Estimated manufacturing overhead costs for the factory: Setup costs: $71,250 Engineering cost: $106,400 Other manufacturing overhead cost: $63,300 Total manufacturing overhead cost: $240,950 Estimated activities for the factory: Number of set-ups: 750 Number of engineering changes: 400 Total annual direct labor hours: 15,000 REQUIRED: A. Calculate the company's manufacturing overhead allocation rates assuming the company uses activity-based costing (Assume that "other" manufacturing overhead costs are allocated based on direct labor hours.) B. Calculate the total cost for product A using activity-based costing for the overhead allocation.

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Transcript

00:01 We are from the given questions, we have to solve the first one a.

00:05 Now let's calculate the company's manufacturing overhead allocation rates assuming company user activities based on the given steps.

00:13 For the first one is setup cost allocation rate given as setup cost allocation rate is equals to setup cost divided by number of setups.

00:40 We are from the given values that is setup cost equals to 71 ,250 divided by 750 is equals to 95 is the setup cost allocation rate.

00:54 Second is engineering cost allocation rate which equals to engineering cost divided by number of engineering changes is equals to 1 ,00 ,600 divided by 400 is equals to 266 is the engineering cost allocation rate.

01:32 Third is other manufacturing overhead cost allocation rate is given as allotted based on the direct labor hours.

01:58 So we have other overhead cost allocation rate is equals to other manufacturing overhead cost divided by total annual direct labor hours is equals to 63 ,300 divided by 15 ,000 is equals to 4 .2.

02:32 Now for calculating the total cost for production a using the activity based costing for the overhead allocation we have direct labor so direct material cost is given as units produced into material cost per unit is equals to 2 ,400 into 2 .10 is equals to 5 ,250.

03:23 Second one is direct labor cost here direct labor cost is equals to direct labor hours into direct labor cost per hour is equals to 400 into 2 .40 is equals to 960 is the direct labor cost.

03:52 Third is setup cost...

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