Before the Amplifier is a manufacturer of guitars. The companysells acoustic and electric guitars....

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Accounting

Before the Amplifier is a manufacturer of guitars. The companysells acoustic and electric guitars. The electric guitar line isnot as profitable as expected despite high production levels.Management is concerned that the price of the electric guitar lineis too high in comparison to its competitors and is consideringswitching to ABC to improve costing accuracy.? Currently,manufacturing overhead is applied to production based on DL hoursand Before the Amplifier sets its sales prices by marking up unitproduct costs.
Activity Cost Driver Cost
Assembly DL hours logged $500
Machining Machine hours logged ?$1,500
Setting Up Equipment Number of setups ?$1,200
Product Movement Number of Moves ?$800
Each Acoustic guitar requires 1 direct labor hour and 0.5machine hours to produce. Each Electric guitar requires 0.8 directlabor hours and 0.4 machine hours to produce. The productionequipment is setup for every 5 Acoustic guitars produced and forevery 25 Electric guitars produced. Acoustic guitars are movedduring production in groups of 20? guitars; Electric guitars aremoved during production is groups of 25 guitars.
The direct material cost per Acoustic guitar is? $60 and thedirect material cost per Electric guitar is? $70. Direct Laborersare paid at a rate of? $25 per hour. The projected productionlevels for the period are 20 Acoustic guitars and 100 Electricguitars.
The total per unit cost of the acoustic line under thetraditional? (current) system is . . . . . . . . . . . . . .
The total per unit cost for the electric line under the activitybased costing? (proposed) system is . . . . . . . ?(round tothe nearest? dollar)
The total amount by which each product line is? over/undercostedis . . . . . . . . . . .

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3.8 Ratings (552 Votes)

Solution The total cost per unit of the acoustic line under the traditional system Total cost per unit Total cost per unit Direct materials 60 Direct labor 25 25 per hour x 1 direct labor hour MOH 40 applied based on direct labor hour Total cost per unit 125 Electric cost per unit Direct material 70 Direct labor 20 25 x 08 DL hours MOH 32 40 x 08 DL hours Total cost 122 Note Manufacturing overhead is applied on the basis of direct labor hour Total manufacturing overhead Assembly 500 See Answer

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In: AccountingBefore the Amplifier is a manufacturer of guitars. The companysells acoustic and electric guitars. The...Before the Amplifier is a manufacturer of guitars. The companysells acoustic and electric guitars. The electric guitar line isnot as profitable as expected despite high production levels.Management is concerned that the price of the electric guitar lineis too high in comparison to its competitors and is consideringswitching to ABC to improve costing accuracy.? Currently,manufacturing overhead is applied to production based on DL hoursand Before the Amplifier sets its sales prices by marking up unitproduct costs.Activity Cost Driver CostAssembly DL hours logged $500Machining Machine hours logged ?$1,500Setting Up Equipment Number of setups ?$1,200Product Movement Number of Moves ?$800Each Acoustic guitar requires 1 direct labor hour and 0.5machine hours to produce. Each Electric guitar requires 0.8 directlabor hours and 0.4 machine hours to produce. The productionequipment is setup for every 5 Acoustic guitars produced and forevery 25 Electric guitars produced. Acoustic guitars are movedduring production in groups of 20? guitars; Electric guitars aremoved during production is groups of 25 guitars.The direct material cost per Acoustic guitar is? $60 and thedirect material cost per Electric guitar is? $70. Direct Laborersare paid at a rate of? $25 per hour. The projected productionlevels for the period are 20 Acoustic guitars and 100 Electricguitars.The total per unit cost of the acoustic line under thetraditional? (current) system is . . . . . . . . . . . . . .The total per unit cost for the electric line under the activitybased costing? (proposed) system is . . . . . . . ?(round tothe nearest? dollar)The total amount by which each product line is? over/undercostedis . . . . . . . . . . .