Problem 3-17A Contrast Activity-Based Costing and Conventional Product Costs [LO3-2, LO3-3, LO3-4]

[The following information applies to the questions displayed below.]

Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow:

	Direct Labor- Hours per Unit	Annual Production	Total Direct Labor-Hours
Model N 800 XL	3.0	3,000 units	9,000
Model N 500	1.4	15,000 units	21,000
			30,000

Additional information about the company follows:

a.	Model N 800 XL requires $90 in direct materials per unit, and Model N 500 requires $45.
b.	The direct labor wage rate is $15 per hour.
c.	The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products.
d.	Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Machine setups	Number of setups	$	480,000
Special processing	Machine-hours		225,000
General factory	Direct labor-hours		1,815,000
		$	2,520,000

	Expected Activity
Activity Measure	Model N 800 XL	Model N 500	Total
Number of setups	160	240	400
Machine-hours	15,000	0	15,000
Direct labor-hours	9,000	21,000	30,000

Problem 3-17A Part 1

Required:

1.	Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.

a.	Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

b.	Compute the unit product cost of each model. (Round your answers to 2 decimal places.)

Problem 3-17A Contrast Activity-Based Costing and Conventional Product Costs [LO3-2, LO3-3, LO3-4] [The following information applies to the questions displayed below.] Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Direct Labor- Hours per Unit Annual Production Total Direct Labor-Hours Model N 800 XL 3.0 3,000 units 9,000 Model N 500 1.4 15,000 units 21,000 30,000 Additional information about the company follows: a. Model N 800 XL requires $90 in direct materials per unit, and Model N 500 requires $45. b. The direct labor wage rate is $15 per hour. c. The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. d. Model N 800 XL is more complex to manufacture than Model N 500 and requires the use of special equipment. Consequently, the company is considering the use of activity-based costing to assign manufacturing overhead cost to products. Three activity cost pools have been identified as follows: Activity Cost Pool Activity Measure Estimated Overhead Cost Machine setups Number of setups $ 480,000 Special processing Machine-hours 225,000 General factory Direct labor-hours 1,815,000 $ 2,520,000 Expected Activity Activity Measure Model N 800 XL Model N 500 Total Number of setups 160 240 400 Machine-hours 15,000 0 15,000 Direct labor-hours 9,000 21,000 30,000