Harmony Audio Inc. manufactures two products: receivers and CD players. The factory overhead incurred is as follows
Indirect labor $210,000
Subassembly Dept 145,000
Final Assembly Dept 95,000
Total $450,000
The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:
Activity Activity Cost Activity Base
Setup $90,000 Number of setups
Quality control 120,000 Number of inspections
Total $210,000
The activity-base usage quantities and units produced for the two products are shown below.
# of # of Direct Labor Direct Labor Units
Setups Inspections Hours-- Hours-- produce
Subassembly Final Assembly
Receivers 200 1,000 600 400 5.000
CD players 40 250 400 600 5,000
Total 240 1250 1,000 1,000 10,000
1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $250,000 and $200,000 for the Subassembly and Final Assembly departments, respectively.
Department Production department rate
Subassembly Dept $__________ per dlh
Final Assembly Dept $__________ per dlh
2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1).
Product Total factory overhead Factory overhead per unit
Receivers: $______________ $___________
Cd Player: $______________ $___________
3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments.
Activity Activity rate
Setup $____________ per setup
Quality Control $____________ per insp.
Subassembly Dept $____________ per dhl
Final Assembly Dept $____________ per dhl
4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.
Product Total Activity Cost Activity Cost per Unit
Receivers $___________ $_____________
CD Players $___________ $______________
5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate method and activity-based costing method. The input in the box below will not be graded, but may be reviewed and considered by your instructor.
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