Question

Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.

Mobile Safes

Walk-in Safes

Units planned for production 200 50 Material moves per product line 300 200 Purchase orders per product line 450 350 Direct labor hours per product line 800 1,700

The total estimated manufacturing overhead was $276,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.)

(1)One mobile safe = $ per unit

(2) One walk- in safe = 4 per unit

Answer 1

Solution

One Mobile safe	$                 441.60
One walk-in safe	$             3,753.60

Working

A	Total Overheads	$    276,000.00
B	Total Direct Labor hours	2,500
(C=A/B)	Plantwide Overheads Rate per Labor dollar	$            110.40

.

		One Mobile safe	One walk-in safe	Total
A	Overhead rate	$                 110.40	$            110.40
B	Direct labor hours	800	1,700
C=A x B	Manufacturing Overheads applied	$           88,320.00	$    187,680.00	$      276,000.00
D	Units	200	50
E=C/D	Per unit cost	$                 441.60	$         3,753.60