(CMA Adapted) Pelder Products Company manufactures two types of engineering diagnostic equipment used in construction. The two products are based on different technologies, x-ray and ultrasound, but are manufactured in the same factory. Pelder has computed the manufacturing costs of the x-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows.
Pelder has identified cost drivers for the three departments as follows: Engineering costs are driven by the number of engineering change orders; material handling by the number of parts; and setup by the number of production setups. Pelder's budgeted manufacturing activities and costs by product line for the period are as follows.
Required
a) Compute the activity cost rate for each of the three support departments.
b) Compute the budgeted cost to manufacture one ultrasound machine using the activity-based costing method.

Question

(CMA Adapted) Pelder Products Company manufactures two types of engineering diagnostic equipment used in construction. The two products are based on different technologies, x-ray and ultrasound, but are manufactured in the same factory. Pelder has computed the manufacturing costs of the x-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows.
  Pelder has identified cost drivers for the three departments as follows: Engineering costs are driven by the number of engineering change orders; material handling by the number of parts; and setup by the number of production setups. Pelder's budgeted manufacturing activities and costs by product line for the period are as follows.
  Required
a) Compute the activity cost rate for each of the three support departments.
b) Compute the budgeted cost to manufacture one ultrasound machine using the activity-based costing method.

Quizplus · Accepted Answer

The Answer of (CMA Adapted) Pelder Products Company manufactures two types of engineering diagnostic equipment used in construction. The two products are based on different technologies, x-ray and ultrasound, but are manufactured in the same factory. Pelder has computed the manufacturing costs of the x-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows.
  Pelder has identified cost drivers for the three departments as follows: Engineering costs are driven by the number of engineering change orders; material handling by the number of parts; and setup by the number of production setups. Pelder's budgeted manufacturing activities and costs by product line for the period are as follows.
  Required
a) Compute the activity cost rate for each of the three support departments.
b) Compute the budgeted cost to manufacture one ultrasound machine using the activity-based costing method.

(CMA Adapted) Pelder Products Company Manufactures Two Types of Engineering