Scott, Inc Required:
A

question 13

Essay

Scott, Inc., manufactures two products, Regular and Deluxe, and applies overhead on the basis of direct labour hours. Anticipated overhead and direct labour time for the upcoming accounting period are $1,600,000 and 25,000 hours, respectively. Information about the company's products follows.
Regular-
Estimated production volume: 3,000 units
Direct materials cost: $28 per unit
Direct labour per unit: 3 hours at $15 per hour
Deluxe-
Estimated production volume: 4,000 units
Direct materials cost: $42 per unit
Direct labour per unit: 4 hours at $15 per hour
Scott's overhead of $1,600,000 can be identified with three major activities: order processing ($250,000), machine processing ($1,200,000), and product inspection ($150,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. $\begin{array} { l l l l } &&\text { Machine } \\& \text { Orders }&\text { Hours }&\text { Inspection } \\& \underline { \text { Processed } } & \underline { \text { Worked } } & \underline { \text { Hours } } \\\text { Regular } & 320 &16,000 & 4,000\\\text { Deluxe } & \underline { 180 } & \underline { 24,000 } & \underline { 6,000 } \\\text { Total } & \underline { \underline { 500 } } & \underline { \underline { 40.000 } } & \underline { \underline { 10,000 } }\end{array}$ Required:
A. Compute the pool rates that would be used for order processing, machine processing, and product inspection in an activity-based costing system.
B. Assuming use of activity-based costing, compute the unit manufacturing costs of Regular and Deluxe if the expected manufacturing volume is attained.
C. How much overhead would be applied to a unit of Regular and Deluxe if the company used traditional costing and applied overhead solely on the basis of direct labour hours? Which of the two products would be undercosted by this procedure? Overcosted?

---

Definitions:

External Conditions

Factors outside an individual that can affect their behavior or performance.

Human Development

The interdisciplinary examination of individuals' growth and transformation throughout their lifespan, focusing on physical, mental, and socio-emotional aspects.

Change

The process or occurrence of becoming different in some particular way, without permanently losing one's identity or essence.

Cognitive Domain

An aspect of human development and psychology that involves processes related to thinking, knowing, remembering, and problem-solving.