Montana Company manufactures three products in its plant: X, Y, and
Z.
Unit costs
and machine hour usage...
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Accounting
Montana Company manufactures three products in its plant: X, Y, andZ.
Unit costsand machine hour usage for the three products are:
X
Y
Z
Direct materials
$38
$32
$44
Direct labor
$17
$11
$15
Machine hours
3
2
4
Budgetedproduction (units)
25,000
33,000
14,000
a)
Assume thatMontana uses a traditional method of overhead allocation, based ondirect labor cost.
Budgetedoverhead for the period is $4,091,800.
Compute theunit cost of production to the nearest cent for products X,Y, andZ.
b)
Now assumethat Montana uses an ABC system with three cost drivers: machinehours, setups, and number of parts.
Product Xrequires two setups per period, and requires five distinct parts.Product Y requires four setups, and eight parts. Product Z requiresten setups and fifteen parts.
Cost pools:
Setups
528,300
Machine hours
2,797,400
Parts
766,100
4,091,800
Compute theunit cost of production for products X, Y, and Z using the ABCsystem.
c)
Identifyseveral possible advantages or disadvantages to Montana of usingthe ABC method. (Limit 200 words).
Answer & Explanation
Solved by verified expert
4.1 Ratings (684 Votes)
A Estimated overhead costs 409180000 477 per direct labor Cost Estimated direct labor hours 85800000 Product DL Hours Plantwide Oh Rate Total Overhead Cost Units Produced Oh Cost per Unit X 42500000 477 202682401 2500000 8107 Y 36300000 477 173114615 3300000 5246 Z 7000000 477
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