Nano Corporation makes plastic and wooden picture frames. The company has assigned $137,000 in monthly manufacturing ove

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Nano Corporation makes plastic and wooden picture frames. The
company has assigned $137,000 in monthly manufacturing overhead
costs to two cost pools as follows: $87,000 to power costs, and
$50,000 to production set-up costs.
Power costs are allocated to products using machine hours as an
activity base. Set-up costs are allocated to products based on the
number of production runs each product line requires.

Nano Corporation Makes Plastic And Wooden Picture Frames The Company Has Assigned 137 000 In Monthly Manufacturing Ove 1 (87.58 KiB) Viewed 75 times

(a) Allocate manufacturing overhead from the activity cost pools
to each product line.
(b) Compare the total per-unit cost of manufacturing plastic frames
and wooden frames.
(c) On a per-unit basis, which product line appears to be most
profitable?
(d) Citing this example, explain the merits and demerits of
pre-determined overhead application rate (POHR), and Activity Based
Costing (ABC).
Plastic Frames Wooden Frames Sales revenue Direct materials. Direct labor ........ Machine hours.. Production runs Units produced and sold.... $254,000 $179,000 $101,000 $38,360 $53,360 $92,720 107,420 7,580 65 35 59,000 29,000