Question

Tiger Furnishings produces two models of cabinets for home theater components, the Basic and the Dominator. Data on operations and costs for March follow: Basic Dominator Total Units produced 1,320 400 1,720 Machine-hours 3,000 3,500 6,500 Direct labor-hours 3,500 3,400 6,900 Direct materials costs $ 10,000 $ 4,750 $ 14,750 Direct labor costs 64,500 35,500 100,000 Manufacturing overhead costs 192,600 Total costs $ 307,350 Tiger Furnishings’s CFO believes that a two-stage cost allocation system would give managers better cost information. She asks the company’s cost accountant to analyze the accounts and assign overhead costs to two pools: overhead related to direct labor cost and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows: Manufacturing Overhead Overhead Estimate Cost Pool Assignment Utilities $ 1,500 Machine-hour related Supplies 4,800 Direct labor cost related Training 9,600 Direct labor cost related Supervision 20,800 Direct labor cost related Machine depreciation 23,000 Machine-hour related Plant depreciation 40,500 Machine-hour related Miscellaneous 92,400 Direct labor cost related Required:

b. Compute the product costs per unit assuming that Tiger Furnishings uses direct labor costs and machine-hours to allocate overhead to the products. (Do not round intermediate calculations.)

Answer 1

Solution b:

Solution:
Direct labor cost related overhead = $4,800 + $9,600 + $20,800 + $92,400 = $127,600

Machine hours related overhead = $1,500 + $23,000 + $40,500 = $65,000

Overhead rate - Direct labor cost related = $127,600 / $100,000 = 127.60%

Overhead rate - Machine hours related = $65,000 / 6500 = $10 per hour

Computation of Product cost per unit - tiger Furnishing
Particulars	Basic	Dominator	Total
Product Costing:
Direct material	$10,000.00	$4,750.00	$14,750.00
Direct labor	$64,500.00	$35,500.00	$100,000.00
Overhead:
Machine related	$30,000.00	$35,000.00	$65,000.00
Labor related	$82,302.00	$45,298.00	$127,600.00
Total overhead	$112,302.00	$80,298.00	$192,600.00
Total cost	$186,802.00	$120,548.00	$307,350.00
Units produced	1320	400
Unit cost	$141.52	$301.37