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		1,360			260			1,620
Machine-hours		3,700			2,800			6,500
Direct labor-hours		3,100			2,500			5,600
Direct materials costs	$	10,000		$	4,350		$	14,350
Direct labor costs		63,500			51,500			115,000
Manufacturing overhead costs								205,355
Total costs							$	334,705

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	$	1,700	Machine-hour related
Supplies		4,400	Direct labor cost related
Training		8,800	Direct labor cost related
Supervision		21,800	Direct labor cost related
Machine depreciation		28,000	Machine-hour related
Plant depreciation		28,800	Machine-hour related
Miscellaneous		111,855	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. Round your final answers to the nearest whole number.)

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. Round your final answers to the nearest whole number.) Basic Dominator Total Product Costing Direct material Direct labor Overhead Machine-related Labor-related Total overhead Total cost Units produced Unit cost 0 $ $ 0 $ 0 $ 0 $ 0 $ 0

Answer 1

(b)   Machine hour related OH rate = Total machine hour related OH costs/ total machine hours

= $58,500/6500hrs = 9/MH

Labour cost related OH rate = Total LC related OH/ total Labour cost

= $146,855/115,000 = 1.277 per $

	Basic	Dominator	Total
Product Costing
DM	10,000	4350	14,350
DL	63,500	51,500	115,000
OH:-
Machine related	33,300(3700*9)	25,200(2800*9)	58,500
Labour related	81,089.5(63500*1.277)	65,765.5(51,500*1.277)	146,855
Total OH	114,389.5	90,965.5	205,355
Total Cost	187,889.5	146,815.5	334,705
Units	1360	260
Unit Cost	138.15 (or) 138	564.67(or) 565