90.2K

Verified Solution

Link Copied!

Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows.

Activity Pools	Cost Pool Total			Cost Driver
Repair and maintenance on assembly machine	$	83,200		Number of units produced
Programming cost		91,260		Number of programming hours
Software inspections		6,090		Number of inspections
Product testing		13,600		Number of tests
Total overhead cost	$	194,150

Expected activity for each product follows.

	Number of Units		Number of Programming Hours		Number of Inspections		Number of Tests
Decoder P	17,000		1,500		194		1,300
Decoder Q	35,000		2,400		96		2,100
Total	52,000		3,900		290		3,400

Assume that before shifting to activity-based costing, Terry Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow.

	Direct Labor Hours
Decoder P	11,000
Decoder Q	32,000
Total	43,000

Required:

a.	Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base. (Round intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)
	Allocated Costs decoder p ?? decoder q ?? total $??

b.	Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC. (Round intermediate calculations and final answers to 2 decimal places.)
cost per unit cost per unit method decoder p decoder p ABC ?? ?? LABOR HOURS ?? ??

Answer & Explanation Solved by verified expert

See Answer