Question

Trundle Inc. makes two styles of trophies, basic and deluxe, and operates at capacity. Trundle does large custom orders. Trundle budgets to produce 10,000 basic trophies and 5,000 deluxe trophies. Manufacturing takes place in two product departments: forming and assembly. In the forming department, indirect manufacturing costs are accumulated in two cost pools, set up and general overhead. In the assembly department, all indirect manufacturing costs are accumulated in general overhead cost pool. The basic trophies are formed in batches of 200 but because of the more intricate detail of the deluxe trophies, they are formed in batches of 50. (Click the i Data Table - X Read the requi 0 Requirements - X rate, if total lirect manufacturi Requirement cost in your uni The controller has asked you to compare plant-wide, department, and activity-based cost allocation. Start by calculd Direct material Forming Assembly Total direct ma Direct manufad Trundle Budgeted Information for the Year Ended November 30, 2017 Forming Department Basic Deluxe Total Direct materials $ 30,800 $ 24,200 $ 55,000 Direct manufacturing labor 30,100 22,400 52,500 Overhead costs Set up 9,450 General overhead 16,800 Assembly Department Basic Deluxe Total Direct materials $ 5,300 $ 12,700 $ 18,000 Direct manufacturing labor 15,800 22,200 38,000 Overhead costs General overhead 22,800 1. Calculate the budgeted unit cost of basic and deluxe trophies based on a single plant-wide overhead rate, if total overhead is allocated based on total direct costs. (Don't forget to include direct material and direct manufacturing labor cost in your unit cost calculation.) 2. Calculate the budgeted unit cost of basic and deluxe trophies based on departmental overhead rates, where forming department overhead costs are allocated based on direct manufacturing labor costs of the forming department and assembly department overhead costs are allocated based on total direct manufacturing labor costs of the assembly department. 3. Calculate the budgeted unit cost of basic and deluxe trophies if Trundle allocates overhead costs in each department using activity-based costing, where setup costs are allocated based on number of batches and general overhead costs for each department are allocated based on direct manufacturing labor costs of each department. 4. Explain briefly why plant-wide, department, and activity-based costing systems show different costs for the basic and deluxe trophies. Which system would you recommend and why? Forming Assembly Total direct ma Total direct cos Enter any num Print Done

Answer 1

Total overhead A
9450+16800+22800	49050
Total direct cost B
55000+52500+18000+38000	163500
Plantwide overhead rate A/B	0.3
Ans1
	Basic	Deluxe
Formimg department
Direct Material C	$30,800	24200
Direct manufacturing labor D	30100	22400
Assembly Department
Direct Material E	5300	12700
Direct manufacturing labor F	15800	22200
Manufacturing overhead (C+D+E+F)*.3	24600	24450
Total cost T	$106,600	$105,950
Budgeted units U	10000	5000
Cost per unit T/U	$10.66	$21.19
ans 2
Forming dept-Overhead rate
(9450+16800)/52500	0.50
Assembly dept
22800/38000	0.60
	Basic	Deluxe
Formimg department
Direct Material C	$30,800	24200
Direct manufacturing labor D	30100	22400
Overhead D*.5	15050	11200
Assembly Department
Direct Material E	5300	12700
Direct manufacturing labor F	15800	22200
Overhead F*.5	9480	13320
Total cost T	$106,530	$106,020
Budgeted units U	10000	5000
Cost per unit T/U	$10.65	$21.20
ans 3
	Basic	Deluxe
Formimg department
Direct Material C	$30,800	24200
Direct manufacturing labor D	30100	22400
Overhead	17192	9058
	(9450/250*200)+(16800/52500*30100)	(9450/250*50)+(16800/52500*22400)
Assembly Department
Direct Material E	5300	12700
Direct manufacturing labor F	15800	22200
Overhead F*.5	9480	13320
	22800/38000*15800	22800/38000*22200
Total cost T	$108,672	$103,878
Budgeted units U	10000	5000
Cost per unit T/U	$10.87	$20.78
ans 4
As the alloaction base is different in all the three methods hence cost is different.
The most logical way to allocate overhead is through activity based costing.
As the activity which is used most through that cost is allocated

If any doubt please comment