Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year.
Lionel Corporation manufactures two products, Aeonand Nova. Nova is of fairly recent origin, having been developed as an attemptto enter a market closely related to that of Aeon. Nova is the more complex ofthe two products and is produced on an automated production line.
Overhead is currently assigned to the productson the basis of direct-labor hours. The company estimated it would incur$450,000 in manufacturing overhead costs and produce 7,500 units of Nova and30,000 units of Aeon during the current year. Unit costs for materials anddirect labor are:
Aeon Nova
Directmaterial ..... $12 $25
Directlabor ........ $10 $20
Required:
A. Compute the predetermined overhead rate under the current method of allocation anddetermine the unit product cost of each product for the current year.