Question:
Assigning activity-based costs in manufacturing, unused capacity, income Halifax Brass Company manufactures pumps and valves and uses a time-driven activity-based cost (TDABC) system. Last year, Halifax recorded the following data for assigning manufacturing overhead costs to its products:
|
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UNIT COST
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TOTAL UNIT TIME
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PRACTICAL CAPACITY
|
|
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ESTIMATES
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ESTIMATES (HOURS
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NOT ASSIGNED TO
|
|
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(RATES PER
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ASSIGNED TO
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PRODUCTS
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|
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HOUR)
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PRODUCTS)
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(HOURS)
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|
|
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PUMPS
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VALVES
|
|
|
Machine setups and
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$20.00 per
|
|
|
|
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run time
|
machine hour
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1,500
|
1,800
|
300
|
|
Labor for setups, receiving,
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$30.00 per labor
|
|
|
|
|
and packing
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hour
|
5,000
|
6,000
|
200
|
|
Engineering (for specializing
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$80.00 per
|
|
|
|
|
products)
|
engineering hour
|
200
|
400
|
50
|
Halifax also developed the following information on revenues and costs other than manufacturing overhead:
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Total revenues
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$890,000
|
|
Total direct labor cost
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$120,000
|
|
Total direct materials cost
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$90,000
|
|
SG&A expenses
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$100,000
|
Required
(a) Using the company's TDABC system, how much manufacturing overhead cost will be assigned to pumps? How much will be assigned to valves?
(b) What is the company's net income? (Assume the company sells the entire amount of the products it produces.)