CompInc.CompInc. produces two products: a high-end laptop computer and an inexpensive laptop. The two products use two manufacturing overhead activities, which have the following costs:
Setting up equipment $8,000
Machining 48,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. $\begin{array}{lrr}&\text { High-end}&\text { Inexpensive }\
\text { Direct Labour } & \$ 24,000 & \$ 8,000 \
\text { Direct Materials } & 15,000 & 4,000 \
\text { Units } & 2,000 & 2,000 \
\text { Machine Hours } & 1,000 & 3,000 \
\text { Sebup Hours } & 150 & 50
\end{array}$
-Refer to CompInc. What is the manufacturing overhead cost per unit for high-end laptops when using a plantwide rate that is based on direct labour costs?
A) $7.00 per laptop
B) $10.00 per laptop
C) $14.00 per laptop
D) $21.00 per laptop

Question

Quizplus · Accepted Answer

The total direct labor cost is $32,000 ($24,000 for high-end + $8,000 for inexpensive). The total overhead cost is $56,000 ($8,000 for setting up + $48,000 for machining). The plantwide overhead rate based on direct labor costs is $56,000 / $32,000 = 1.75. The overhead cost allocated to high-end laptops is 1.75 * $24,000 = $42,000. Dividing this by the 2,000 high-end units gives $21.00 per laptop.

CompIncCompInc -Refer to CompInc