Question

The LeanOut Corporation manufactures diet aids. The current product mix includes travel scales, metabolism boosting protein powders, low carb diet bars for travel snacks and downloadable exercise videos for use in small spaces with low impact. Since the company initially started production with the metabolism boosting protein powders, and added the other products over time, the costing methods used were those for a simple mass produced product and were not adjusted as the lower volume product lines were added The current method applies overhead using one plant-wide-rate based on direct labor dollars since those numbers are readily available. The company is privately held and the owners function as managers. Those owner/managers feel the extra work needed to determine a more accurate cost is not worth the added expense Most of the product lines are produced in family lines with dedicated assets. Since these machines and personnel are only used to produce one product line, costs can be traced directly to each product line. Only the shared fixed overhead costs need Due to the popularity of the products, management is considering some expansion. Currently all production is sold in the same period in which it is produced. Management handles any over or under-applied shared fixed manufacturing overhead as an additional cost of goods sold $2,000,000 $400,000 Estimated Shared Fixed Overhead Estimated Direct Labor Dollars The Shared Fixed Overhead Predetermined Overhead The current revenues and costs for the products are below: Protein Powder 100,000 Travel ScalesDiet Bars Exercise Videos Total Volume 80,000 70,000 50,000 $3,000,000$2,000,000 $157,500 $750,000 $5,907,500 Sales Revenue Variable Unit Based Costs: Direct Material Sales Commission Contribution Margin Dedicated Overhead Costs Direct Labor Machine Depreciation Supervision Product Margin 150,000 $300,000 2,550,000 $480,000 200,000 $1,320,000 $14,000 $15,750 $127,750 $25,000 $75,000 $650,000 $669,000 $590,750 $4,647,750 $100,000 $100,000 $80,000 2,270,000 $180,000 S500,000 200,000 $440,000 $21,000 $25,000 60,000 $21,750 $39,000 $150,000 $125,000 336,000 $340,000 $775,000 $465,000 $3,067,750 Additional Information: Shared Overhead Costs Activities Insuring the Plant and the Plant Equipment and Paying Plant Taxes and Recording Depreciation Receiving and Moving Materials Designing the Product Providing Power and Maintaining Equipment Managing the Plant Total Total Cost $960,000 $250,000 $400,000 $300,000 $250,000 2,160,000

Answer 1