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		1,140			410			1,550
Machine-hours		3,500			3,000			6,500
Direct labor-hours		3,400			3,100			6,500
Direct materials costs	$	12,000		$	4,050		$	16,050
Direct labor costs		62,000			53,000			115,000
Manufacturing overhead costs								204,205
Total costs							$	335,255

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		4,400	Direct labor cost related
Training		8,800	Direct labor cost related
Supervision		22,800	Direct labor cost related
Machine depreciation		32,000	Machine-hour related
Plant depreciation		25,000	Machine-hour related
Miscellaneous		109,705	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

	To allocate the Manufacturing Overhead cost to products first we have to determine the Overhead rate per machine hours and overhead rate per direct labor costs.
	Manufacturing Overhead	Overhead Cost
	Utilities	$                                           1,500
	Machine Depreciation	$                                         32,000
	Plant Depreciation	$                                         25,000
	Total Manufacturing overhead ralated to Machine	$                                         58,500
	Total Machine Hours	6500
	Manufacturing Overhead per machine hours	$                                             9.00	per machine hours
	Supplies	$                                           4,400
	Training	$                                           8,800
	Supervision	$                                         22,800
	Miscellaneous	$                                      1,09,705
	Total Manufacturing overhead ralated to labor	$                                      1,45,705
	Total Direct labor Costs	$                                      1,15,000
	Manufacturing Overhead per direct labor costs	$                                         1.2670	per direct labor costs
	Allocation of Manufacturing Overhead Costs
		Basic	Dominator
	Machine Hours	3500	3000
	Direct labor Costs	$                                         62,000	$                                53,000
	Machine Hours*MOH per machine hours	$                                         31,500	$                                27,000
	Direct labor hours*MOH per direct labor costs	$                                         78,554	$                                67,151
	Total Manufacturing Overhead Costs allocated	$                                      1,10,054	$                                94,151
	Units Produced	1140	410
	Manufacturing Overhead Costs per unit	$                               96.53859649	$                    229.63658537
	Computation of Product Costs
		Basic	Dominator
	Direct materials Costs per unit	$                               10.52631579	$                        9.87804878
	Direct labor Costs per unit	$                               54.38596491	$                    151.21951220
	Manufacturing Overhead Costs per unit	$                               96.53859649	$                    229.63658537
	Unit Products costs	$                                         161.45	$                                390.73