Holt Medical Corporation Manufactures Two Models of a Medical Device

question 112

Essay

Holt Medical Corporation manufactures two models of a medical device: Model 101 and Model 102.
Below is the current year production data for the company:

	Model 101	Model 102
Direct material in units	97,000	113,000
Direct labor hours	30,000	40,000
Machine hours	26,000	13,000
Number of setups	300	600
Number of devices produced	16,000	8,000

The 210,000 units of material had a total cost of $1,365,000.Direct labor is $17 per hour.
The company has total overhead production costs of $1,850,000.
a.If Holt Medical Corporation applies factory overhead using direct labor hours,compute the total production cost and the unit cost for each model
b.If Holt Medical Corporation applies factory overhead using machine hours,compute the total production cost and the unit cost for each model.
c.Assume that Holt Medical Corporation has established the following activity centers,costs drivers,and costs to apply factory overhead.

Cost Pool	Cost Driver	Cost	Volume
Equipment Maintenance	# of machine hours	$585,000	39,000
Production Setup	# of setups	$125,000	900
Material Handling	Units of Materials	$540,000	210,000
Transportation Costs	# of devices produced	$600,000	24,000

Compute the total cost and the unit cost for each model.
d.Explain why the unit cost for each model is different across the three methods of overhead application.How can such information benefit an organization?

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Definitions:

Late

Occurring or coming after the usual, expected, or planned time.

Chunking

A memory technique that involves grouping pieces of information together into larger, more manageable units.

Meaningful Units

Smallest segments of language that carry semantic meaning, such as words or morphemes.

Short-term Memory

Holding a minimal amount of details in an alert, easily retrievable condition in the memory for a short time span.