Accounting Problems

Problem 8-28 (Appendix 8B ) Activity-Based Costing as an Alternative to Traditional Product Costing [LO7] For many years , Gorski Company manufactured a single product called a mono-circuit . Then , three years ago , the company automated a portion of its plant and at the same time introduced a second product called a bi-circuit that has become increasingly popular . The bi-circuit product is a more complex product than the mono-circuit , requiring two hours of direct labor time per unit to manufacture , and extensive machining in the automated portion of the plant . In addition , it requires numerous

br inspections to ensure that high quality is maintained . The mono-circuit requires only one hour of direct labor time per unit , only a small amount of machining , and few quality control checks . Manufacturing overhead costs are assigned to the products on the basis of direct labor-hours

Despite the growing popularity of the company 's new bi-circuit , profits have declined steadily . Management is beginning to believe that the company 's costing system may be faulty . Unit costs for materials and labor for the two products follow Mono-circuit Bi-Circuit

Direct materials 38 89

Direct labor 15 per hour 15 30 Management estimates that the company will incur 3 ,691 ,400 in manufacturing overhead costs during the current year and that 34 ,000 units of the mono-circuit and 8 ,500 units of the bi-circuit will be produced and sold Requirement 1 (a ) Compute the predetermined overhead rate assuming that the company continues to apply manufacturing overhead cost to products on the basis...