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Q1) Broomfield Company budgeted $8,000,000 of manufacturing overhead for present year, and 40,000 hours of direct labor (cost of $50/hour). Production of Product X (100,000 units) consumed $320,000 of direct materials, and 7,000 direct labor hours.

a) If overhead is assigned on the basis of direct labor hours, find out unit cost of Product X.

b) Suppose instead that Broomfield uses the ABC system, with three cost drivers: machine hours, materials handling, and setups.  Of the total overhead cost, 60% is in machine hour pool (30,000 budgeted hours), 25% is in materials pool (assigned based on $1,600,000 of total materials budgeted to be used), and 15% in setup pool (200 budgeted setups). Additionally to materials and labor listed above, Product X used 5,500 machine hours and 57 setups.  find out unit cost of Product X under the ABC system.  Describe briefly.

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  • Category:- Accounting Basics
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