Tulip Company produces two products, T and U. The indirect labor costs include the following two items: $\begin{array}{lr}
\text { Plant supervision } & \$ 700,000 \
\text { Setup labor indirect) } & \$ 300,000 \
\text { Total indirect labor } & \$ 1,000,000
\end{array}$ The following activity-base usage and unit production information is available for the two products: $\begin{array}{cccc}&\text { Number of}&\text { Direct Labor }\
&\text { Setups } & \text { Hours } & \text { Units }\
\text { Product T } & 200 & \overline{20,000} & 900 \
\text { Froduct U } & \underline{200} & \underline{30,000} & \underline{1,100} \
\text { Total } & \underline{400} & \underline{50,000} & \underline{2,000}
\end{array}$ a) Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.
b) Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate.
c) Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups.
d) Determine the factory overhead cost per unit for Products T and U, using activity-based costing.
e) Why is the factory overhead cost per unit different for the two products under the two methods?

Question

Tulip Company produces two products, T and U. The indirect labor costs include the following two items: $\begin{array}{lr}
\text { Plant supervision } & \$ 700,000 \
\text { Setup labor indirect) } & \$ 300,000 \
\text { Total indirect labor } & \$ 1,000,000
\end{array}$ The following activity-base usage and unit production information is available for the two products: $\begin{array}{cccc}&\text { Number of}&\text {  Direct Labor }\
&\text { Setups } & \text { Hours } & \text { Units }\
\text { Product T } & 200 & \overline{20,000} & 900 \
\text { Froduct U } & \underline{200} & \underline{30,000} & \underline{1,100} \
\text { Total } & \underline{400} & \underline{50,000} & \underline{2,000}
\end{array}$ a) Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.
b) Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate.
c) Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups.
d) Determine the factory overhead cost per unit for Products T and U, using activity-based costing.
e) Why is the factory overhead cost per unit different for the two products under the two methods?

Quizplus · Accepted Answer

The Answer of Tulip Company produces two products, T and U. The indirect labor costs include the following two items: $\begin{array}{lr}
\text { Plant supervision } & \$ 700,000 \
\text { Setup labor indirect) } & \$ 300,000 \
\text { Total indirect labor } & \$ 1,000,000
\end{array}$ The following activity-base usage and unit production information is available for the two products: $\begin{array}{cccc}&\text { Number of}&\text {  Direct Labor }\
&\text { Setups } & \text { Hours } & \text { Units }\
\text { Product T } & 200 & \overline{20,000} & 900 \
\text { Froduct U } & \underline{200} & \underline{30,000} & \underline{1,100} \
\text { Total } & \underline{400} & \underline{50,000} & \underline{2,000}
\end{array}$ a) Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.
b) Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate.
c) Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups.
d) Determine the factory overhead cost per unit for Products T and U, using activity-based costing.
e) Why is the factory overhead cost per unit different for the two products under the two methods?

Tulip Company Produces Two Products, T and U The Following Activity-Base Usage and Unit Production Information Is Available