Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Product A Product B
Number of units produced 11,500 units 1.700 units
Direct labor cost ($29 per DLH) 0.16 DLH per unit 0.24 DLH per unit
Direct materials cost $2.10 per unit $3.10 per unit

Activity Overhead costs
Machine setup $94,104
Materials handling 53,000
Quality control inspections 73.200
$220,304

Required

a. Using direct labor hours as the basis for assigning overhoad costs, determine the total production cost per unit for each product line.
b. If the market price for Product A is $28.68 and the market price for Product B is $58, determine the profit or loss per unit for each.
c. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to what is the cost per unit for Product A and for Product B?

a. Product A $257,830 , Product B $57,086

b. Product A $71,990 , Product B $41,514

c. Hie, for this part of the question there is missing information regarding the  Activities for the two Products for each Activity Center.

However the Procedure to deal with the required is explained below :

Step 1 : Determine the Overhead Absorption Rate for Each Activity Center

(We have three Activity Centers: Machine setup, Materials handling: Quality control inspections )

Overhead Absorption Rate = Total Overhead (for each) / Total Number of Activity

Step 2: Absorb the Costs in the products using the Rate for each cost center and the number of activity incurred in each cost center for the two Products

Overhead (Activity Center) = Overhead Absorption Rate× Activity Specific to the Product.

Step 3 : Determine the Total Costs

Total Cost for one Product would include the Total Costs for each Activity Center (which are your overheads) plus the Direct Labor and Direct Material Costs as Calculated in Part b.

Explanation:

Part a

Total Production Cost = Direct Costs + Indirect costs (overheads)

First determine the predetermined rate based on direct labor hours.

Total direct labor hours.

Product A (11,500×0.16) =   1,840

Product B (1.700×0.24)   =    408

Total                                 = 2,248

Predetermined rate = total overhead cost / total direct labor hours

                                 = $220,304 / 2,248

                                 = $98 per labor hour

Assigning Overhead Cost

Total Overhead Costs

Product A (1,840×$98) = 180,320

Product B (408×$98)   =   39,984

Total                             = 220,304

Total Costs

                                                 Product A      Product B

Direct labor cost

Product A ( 1,840×$29)              53,360

Product B (408×$29)                                         11,832

Direct materials cost

Product A ( 11,500×$2.10)          24,150

Product B (1.700×$3.10)                                    5,270

Overheads

Product A                                 180,320

Product B                                                         39,984

Total Costs                              257,830            57,086

Part b.

Profit = Selling Price - Expenses

                                                   Product A      Product B

Sales

Product A ( 11,500×$28.68)        329,820

Product B (1.700×$58)                                        98,600

Manufacturing Costs                 (257,830)        (57,086)

Profit                                              71,990              41,514

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