Pitney Corporation Manufactures Two Types of Transponders-No The Controller, Who Is Studying the Use of Activity-Based Costing

question 11

Essay

Pitney Corporation manufactures two types of transponders-no. 156 and no. 157-and applies manufacturing overhead to all units at the rate of $76.50 per machine hour. Production information follows.
$\begin{array}{lll} & \underline{\text { No. } 156} & \underline{\text { No. } 157} \\\text { Anticipated volume (units) } & \underline{\underline{6.000}} & \underline{14.000} \\\text { Direct material cost } & \$ 40 & \$ 65 \\\text { Direct labour cost } & 25 & 25\end{array}$ The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours worked, and outgoing shipments, the activities' three respective cost drivers, follow. $\begin{array}{lccc} & \underline{\text { No. } 156} & \underline{\text { No. } 157} &\underline {\text { Total } } \\\text { Setups } & 60 & 40 & 100 \\\text { Machine hours worked } & 15,000 & 25,000 & 40,000 \\\text { Outgoing shipments } & 120 & 80 & 200\end{array}$ The firm's total overhead of $3,060,000 is subdivided as follows: manufacturing setups, $260,000; machine processing, $2,400,000; and product shipping, $400,000.
Required:
A. Compute the pool rates that would be used for manufacturing setups, machine processing, and product shipping in an activity-based costing system.
B. Assuming use of activity-based costing, compute the unit overhead costs of product nos. 156 and 157 if the expected manufacturing volume is attained.
C. Assuming use of activity-based costing, compute the total cost per unit of product no. 156.
D. If the company's selling price is based heavily on cost, would a switch to activity-based costing from the current traditional system result in a price increase or decrease for product no. 156? Show computations.

Understand the function and importance of a grievance system within a unionized setting.

Recognize the role of legislation in shaping labor relations and union activities.

Grasp the significance of settlement zones in the negotiation process.

Understand the implications of employing contingent and temporary workers in a unionized environment.

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Definitions:

Labor's Share

The portion of national income or the total output of the economy that is allocated to workers in the form of wages and salaries.

National Income

The total income earned by a country's residents and businesses, including wages, profits, and investment returns, reflecting the economic health of the nation.

Present Value

The value at present of future monetary sums or cash flow streams, determined by applying a given rate of return.

Interest

The payment made for the use of (borrowed) money.