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Q5. ABC Corporation manufactures two products, Product M and Product N. Product N is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product N. Product N is the more complex of the two products, requiring one hour of direct labor time per unit to manufacture compared to one-half hour of direct labor time for Product M. Product N is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labor-hours. The company estimated it would incur SAR 500,000 in manufacturing overhead costs and produce 10,000 units of Product N and 60,000 units of Product M during the current year. Unit cost for materials and direct labor are: Direct material...... Direct labor Product M SAR 10 SAR 8 Product N SAR 24 SAR 12 Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity cost Pools Machine setups required ..... Purchase orders issued........ Machine-hours required ...... Maintenance requests issued... Estimated Overhead Costs SAR 200,000 Expected Activity Product M Product N Total 800 43,500 500 104,000 3,000 152,500 860 SAR 500,000 1,200 100 10,000 1,140 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

Q5. ABC Corporation manufactures two products, Product M and Product N. Product N is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product N. Product N is the more complex of the two products, requiring one hour of direct labor time per unit to manufacture compared to one-half hour of direct labor time for Product M. Product N is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labor-hours. The company estimated it would incur SAR 500,000 in manufacturing overhead costs and produce 10,000 units of Product N and 60,000 units of Product M during the current year. Unit cost for materials and direct labor are: Direct material...... Direct labor Product M SAR 10 SAR 8 Product N SAR 24 SAR 12 Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity cost Pools Machine setups required ..... Purchase orders issued........ Machine-hours required ...... Maintenance requests issued... Estimated Overhead Costs SAR 200,000 Expected Activity Product M Product N Total 800 43,500 500 104,000 3,000 152,500 860 SAR 500,000 1,200 100 10,000 1,140 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Q5. ABC Corporation manufactures two products, Product M and Product N. Product N is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product N. Product N is the more complex of the two products, requiring one hour of direct labor time per unit to manufacture compared to one-half hour of direct labor time for Product M. Product N is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labor-hours. The company estimated it would incur SAR 500,000 in manufacturing overhead costs and produce 10,000 units of Product N and 60,000 units of Product M during the current year. Unit cost for materials and direct labor are: Direct material...... Direct labor Product M SAR 10 SAR 8 Product N SAR 24 SAR 12 Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity cost Pools Machine setups required ..... Purchase orders issued........ Machine-hours required ...... Maintenance requests issued... Estimated Overhead Costs SAR 200,000 Expected Activity Product M Product N 800 43,500 500 104,000 3,000 152,500 860 SAR 500,000 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.
Transcribed Image Text:Q5. ABC Corporation manufactures two products, Product M and Product N. Product N is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product N. Product N is the more complex of the two products, requiring one hour of direct labor time per unit to manufacture compared to one-half hour of direct labor time for Product M. Product N is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labor-hours. The company estimated it would incur SAR 500,000 in manufacturing overhead costs and produce 10,000 units of Product N and 60,000 units of Product M during the current year. Unit cost for materials and direct labor are: Direct material...... Direct labor Product M SAR 10 SAR 8 Product N SAR 24 SAR 12 Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity cost Pools Machine setups required ..... Purchase orders issued........ Machine-hours required ...... Maintenance requests issued... Estimated Overhead Costs SAR 200,000 Expected Activity Product M Product N 800 43,500 500 104,000 3,000 152,500 860 SAR 500,000 1,200 100 10,000 1,140 Total 2,000 600 13,000 2,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.
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