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Coronado makes two products, Simple and Complex. As their names suggest, Simple is the more...

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Accounting

Coronado makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $2,310,000:

Rate
Assembly $0.80 per direct labor hour
Fabrication $15 per machine hour
Setups $20 per batch
Bonding $230,000 direct to Complex

Only the Complex product requires bonding, so all the costs of bonding should be allocated to Complex. The following data relate to both products.

Simple Complex
Units produced 100,000 40,000
Direct labor hours 240,000 160,000
Machine hours 80,000 30,000
Batches 1,500 4,000

(a)

Your answer is correct.

Using the traditional method of allocating overhead costs,

allocate overhead cost to the products.
show that the overhead assigned to each product sums to the total company overhead.
determine the overhead cost per unit for each product.

(Round overhead rate and overhead per unit answers to 2 decimal places, e.g. 15.25.)

Simple Complex Total
Machine hours 80000 30000
Overhead rate 21 21
Total overhead to product 1680000 630000 231000

Simple Complex
Total overhead to product 1680000 630000
Number of units produced 100000 40000
Overhead per unit 16.80 15.75

(b)

Using the activity-based costing rates,

allocate overhead cost to the products.
show that the overhead assigned to each product sums to the total company overhead.
determine the overhead cost per unit for each product.

(Round per unit answers to 2 decimal places, e.g. 15.25.)

Simple Complex Total
Assembly $enter a dollar amount $enter a dollar amount
Fabrication enter a dollar amount enter a dollar amount
Setups enter a dollar amount enter a dollar amount
Bonding enter a dollar amount enter a dollar amount
Total overhead $enter a total amount $enter a total amount $
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