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. Units produced Machine-hours Direct labor-hours Direct materials costs Direct labor costs Manufacturing overhead costs Total costs Basic 1,eee 4,500 3,080 $10, eee 64,500 Dominator 250 2,500 2,000 $ 3,750 35,588 Total 1,250 7,000 5,888 $ 13,750 100,000 175,000 $288,750 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 Utilities Supplies Training Supervision Machine depreciation Plant depreciation Miscellaneous Overhead Estimate Cost Pool Assignment $ 1,800 Machine-hour related 5,000 Direct labor cost related 10,680 Direct labor cost related 25,800 Direct labor cost related 32,100 Machine-hour related 14,480 Machine-hour related 85,388 Direct labor cost related

Answer 1

a) Machine hour related overhead rate = 48300/7000 = 6.90 per hour

Labor cost related overhead rate = 126700/100000 = 1.267 per $

	Basic	dominator	Total
Product costing
Direct material	10000	3750	13750
Direct labor	64500	35500	100000
Overhead
Machine related	31050	17250	48300
Labor related	81722	44978	126700
Total overhead	112772	62228	175000
Total Cost	187272	101478	288750
Unit	1000	250
Unit cost	187	406