Question

Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $300,800. During that time, the company produced 12,300 units of the M-008 and 2,600 units of the M-123. The direct costs of production were as follows: Direct materials Direct labor M-008 $ 98,400 98,400 M-123 $ 104,000 52,000 Total $ 202,400 150,400 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows: Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Costs $ 116,800 90,000 94,000 $ 300,800 Activity Level M-008 M-123 8,000 2,000 20 20 30 50 Total 10,000 40 80 Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round your intermediate calculations and final answers to 2 decimal places.) M-008 M-123 Total overhead Total unit cost

Answer 1

A C Е F G 1 a) M-008 M-123 Total Activity Activity level Overhead allocated 2000 $ 23,360 20 $ 45,000 50 $58,750 $127,110 Activity level Activity Overhead level allocated rate Cost drivers 2 Costs 8000 $ 10000 $ 3 Machine hours 116,800 11.68 93,440 40 $ 2,250 20 $ $ 4 Production runs 90,000 45,000 35,250 80 $ 1,175 5 Inspections 30 $ 94,000 Total overhead allocated 6 173,690 7 M-123 8 М-008 98,400 $ 98,400 $ $ $ materials 104,000 10 Direct labor 52,000 173,690 $ 370,490 $ 11 Total Overhead 127,110 12 Total cost 283,110 13 Number of units 12300 2600 30.12 $ 14 Total unit cost 108.89 15 16 b) M-008 17 M-123 18 Direct materials 98,400 $ 104,000 98,400 $ $ 19 Direct labor 52,000 196,800 $ 20 Total Overhead $ 104,000 393,600 $ 21 Total cost 260,000 22 Number of units 12300 2600 32 $ 23 Total unit cost 100

A. В C E G Н 1 a) M-008 M-123 Activity Overhead allocated Activity Overhead level Activity allocated Total Activity level Cost drivers rate level 2 Costs +D3*E3 +D3*G3 -в3/сз 3 Machine hours 116800 10000 2000 8000 +B4/C4 +B5/C5 4 Production runs 90000 +D4*E4 +D4 *G4 40 20 20 5 Inspections +D5*E5 30 =+D5*G5 94000 80 50 +F3+ F4+F5 +H3+ H4+H5 Total overhead allocated 6 7 M-008 M-123 8 9 Direct materials 98400 104000 10 Direct labor 52000 98400 11 Total Overhead +F6 =+H6 +C9+C10+C11 12 Total cost +B9+B10+B11 13 Number of units 12300 2600 | -C12/с13 +B12/B13 14 Total unit cost 15 16 b) M-123 17 M-008 18 Direct materials 98400 104000 19 Direct labor 98400 52000 20 Total Overhead 300800/150400*98400 300800/150400*52000 +C18+C19+C20 21 Total cost =+B18+B19+B20 22 Number of units 12300 2600 +B21/B22 ЕC21/C22 23 Total unit cost