Vikarmbhai Problem 6-67 (Algo) Two-Stage Allocation and Product Costing (LO 6-2, 3)Hall, Incorporated manufactures two components, Standard and Ultra, that are designed for the same function, but are made ofdifferent metals for operational performance reasons. The metal used in Standard is easy to work with and there are few quality issuesor reworking required on the machines. The metal used in Ultra is more difficult to work with and often needs additional machine timeand rework.Data on expected operations and direct costs for the next fiscal year follow:Units producedDirect labor-hours usedMachine-hours usedDirect materials costsDirect labor costsStandard48,000144,00024,000Ultra16,500Total22,50022,50064,500166,50046,500$ 3,384,0002,520,000$ 5,163,000855,000$ 8,547,0003,375,000The planning process team at Hall, Incorporated has estimated the following manufacturing overhead costs for the next fiscal year:AccountAmountAdministrationEngineeringMachine operation and maintenanceMiscellaneousSupervisionTotal$ 825,4005,699,500875,000540,100884,500$ 8,824,500The cost accounting system at Hall, Incorporated calculates product costs by adding allocated overhead to the direct costs of theproduct. Overhead costs are allocated based on direct labor-hours.Required:a. Compute the estimated per unit product costs for the next fiscal year, based on the current cost accounting system.b. An analyst on the planning process team suggests that a two-stage system would improve the estimated product costs. The analystsuggests that overhead be first assigned to on one of two cost pools: Machine related and labor related. Machine-related overheadconsists of the accounts "Engineering" and "Machine operation and maintenance." Labor-related overhead consists of theremaining manufacturing overhead. Machine-related costs would be allocated based on machine-hours. Labor-related overheadwould be allocated based on direct labor cost. Compute the estimated per unit product costs for the next fiscal year, based on thesystem proposed by the analyst.

Activity-based costing (ABC) is a method of cost accounting that allocates the overhead costs among…

Problem 6-67 (Algo) Two-Stage Allocation and Product Costing (LO 6-2, 3) Hall, Incorporated manufactures two components, Standard and Ultra, that are designed for the same function, but are made of different metals for operational performance reasons. The metal used in Standard is easy to work with and there are few quality issues or reworking required on the machines. The metal used in Ultra is more difficult to work with and often needs additional machine time and rework. Data on expected operations and direct costs for the next fiscal year follow: Units produced Direct labor-hours used Machine-hours used Direct materials costs Direct labor costs Standard 48,000 144,000 24,000 Ultra 16,500 22,500 22,500 Total 64,500 166,500 46,500 $ 3,384,000 2,520,000 $ 5,163,000 855,000 $ 8,547,000 3,375,000 The planning process team at Hall, Incorporated has estimated the following manufacturing overhead costs for the next fiscal year: Account Administration Engineering Machine operation and maintenance Miscellaneous Supervision Total Amount $ 825,400 5,699,500 875,000 540,100 884,500 $ 8,824,500 The cost accounting system at Hall, Incorporated calculates product costs by adding allocated overhead to the direct costs of the product. Overhead costs are allocated based on direct labor-hours. Required: a. Compute the estimated per unit product costs for the next fiscal year, based on the current cost accounting system. b. An analyst on the planning process team suggests that a two-stage system would improve the estimated product costs. The analyst suggests that overhead be first assigned to on one of two cost pools: Machine related and labor related. Machine-related overhead consists of the accounts "Engineering" and "Machine operation and maintenance." Labor-related overhead consists of the remaining manufacturing overhead. Machine-related costs would be allocated based on machine-hours. Labor-related overhead would be allocated based on direct labor cost. Compute the estimated per unit product costs for the next fiscal year, based on the system proposed by the analyst.