Question 2 The ledger of Custer Company has the following work in process account.
Work in Process—Painting
5/1 Balance 4,070 5/31 Transferred out ?
5/31 Materials 6,330
5/31 Labor 3,850
5/31 Overhead 1,720
5/31 Balance ?

Production records show that there were 470 units in the beginning inventory, 30% complete, 1,430 units started, and 1,510 units transferred out. The beginning work in process had materials cost of $2,350 and conversion costs of $1,720. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.

(a) How many units are in process at May 31?
(b) What is the unit materials cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)
(c) What is the unit conversion cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)
d) What is the total cost of units transferred out in May?
(e) What is the cost of the May 31 inventory?

Question 3

Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.
Standard Custom
Direct labor costs $49,300 $115,000
Machine hours 1,410 1,260
Setup hours 99 400

Total estimated overhead costs are $306,500. Overhead cost allocated to the machining activity cost pool is $195,000, and $111,500 is allocated to the machine setup activity cost pool.

(a) Compute the overhead rate using the traditional (plantwide) approach. (Round answers to 2 decimal places, e.g. 12.25%.)
(b) Compute the overhead rates using the activity-based costing approach.
(c) Determine the difference in allocation between the two approaches.