a) The computation of the single plantwide predetermined overhead rate for Tent Master is $6 per DLH ($252,000/42,000).
b) The computation of the overhead cost per unit for Pup and Pop-up Tents for Tent Master is computed as follows:
Pup Tents Pop-up Tents
Overhead cost $24 ($6 x 4) $18 ($6 x 3)
c) The computation of the product cost per unit for Pup and Pop-up Tents is as follows:
Per Unit Selling Direct Direct Overhead Product
Price Materials Labor per unit Cost / Unit
Pup tent $ 78 $ 20 $ 45 $24 $89
Pop-up tent 73 25 30 $18 $73
d) The computation of the gross profit per unit (selling price per unit minus the product cost per unit) of Pup and Pop-up Tents is as follows:
Per Unit Selling Direct Direct Overhead Product Gross Profit
Price Materials Labor per unit Cost / Unit (Loss) per unit
Pup tent $ 78 $ 20 $ 45 $24 $89 ($11) ($78 - $89)
Pop-up tent 73 25 30 $18 $73 $0 ($73 - $73)
The determination of the product cost includes the costs of direct materials, direct labor, and overhead. The overhead cost is allocated to each unit based on a predetermined overhead rate (budgeted overheads/budgeted usage) or using an activity-based costing technique.
Budgeted overhead costs = $252,000
Budgeted direct labor hours = 42,000
Tent Master produces Pup tents and Pop-up tents. The company budgets $252,000 of overhead cost and 42,000 direct labor hours. Additional information follows:
Per Unit Selling Price Direct Materials Direct Labor DL Hours
Pup tent $ 78 $ 20 $ 45 4
Pop-up tent 73 25 30 3
1. Compute a single plantwide overhead rate assuming the company allocates overhead costs based on 42,000 direct labor hours.
2. Pup tents use 4 direct labor hours (DLH) per unit and Pop-up tents use 3 direct labor hours per unit. Compute the overhead cost per unit for each product.
3. Compute the product cost per unit for each product.
4. For each product, compute the gross profit per unit (selling price per unit minus the product cost per unit).
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