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This is my working but I am not sure if these are correct.
a) Plant-wide overhead based on machine hours?
(16,000 + 423,775 + 176,625) / (16,000 + 22,525) = $16 per machine hour.
b) Compute the unit manufacturing costs of Product A using machine hours as the basis
of allocation of factory overhead.Prime cost $32.5 x 4,000 = $130,000
Overhead cost $16 x 16,000 = $256,000
Total manufacturing cost $386,000
Unit cost $386,000 / 4,000 = $96.5What you have done is correct 🙂
(However, I do not know where you found this question, but it could not be presented in this way for Paper F2. Whoever gave it you has ‘stolen’ it from Paper F5 where they could ask extra things and the information about ‘activity drivers’ would be relevant.)
In Paper F2, although they could ask what was in part (a) and part (b), they would not confuse by presenting the information in the way they they have here.
Thanks a lot for your confirmation, John. Just one more question, so I can ignore the machine setups and inspections in Overhead costs (in part b)?
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