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(Solved) (Latest ver. Aug 2020) - Overhead costs/ Transfer price

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Company XYZ attempting to determine costs associated with various jobs. Current production records show the following information for two recent jobs:

Job 1Job 2
Direct materials costs$15,600$31,200
Direct labor costs:
Assembly Department$ 3,900$ 5,200
Cutting Department$10,400$ 2,600
Machine hours used in the
Assembly Department200600
Units completed150200

Assume overhead application rates of $16 per machine hour for the Assembly Department and 150 percent of direct labor costs (dollars) for the Cutting Department.


a.What are the total overhead costs applied to Job 1?
b.What is the total cost associated with Job 2?

A company manufactures two products: A and B. The overhead costs have been divided into four overhead pools that use the following cost drivers:

NumberNumberof LaborLabor
Productof Ordersof SetupsTransactionsHours
Cost per pool:$16,000$13,000$2,400$20,000


a.Assign overhead costs to products X and Y using a direct labor hours basis.
b.Assign overhead costs to products X and Y using activity-based costing.

TCK sells all of its output to the Final Product Division of the company. The only product of the Components Division is a remote control shell used by the Final Product Division. If bought from outside, the retail price would be $2 per shell. Each remote control completed by the Final Product Division requires one shell. Production quantity and cost data for the year are as follows:

Remote control shells10,000 shells
Direct materials$3,000
Direct labor$2,000
Factory overhead (25 percent is variable)$2,000
Administrative expenses (20 percent is variable)$2,500

Required: Compute the transfer price per unit for a remote control shell using

a.Market price.
b.Variable product costs plus 20 percent.
c.Absorption costs plus 20 percent.


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