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 $334,400. During that time, the company produced 14,900 units of the M-008 and 2,400 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $119,200 $ 96,000 $215,200 Direct labor 119,200 48,000 167,200 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Activity Level M-008 М-123 Cost Driver Costs Total Number of machine-hours $164,400 1,000 9,000 10,000 Number of production runs 80,000 10 30 40 Number of inspections 90,000 25 25 50 Total overhead $334,400 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? b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? Complete this question by entering your answers in the tabs below. Required A Required B
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 $334,400. During that time, the company produced 14,900 units of the M-008 and 2,400 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $119,200 $ 96,000 $215,200 Direct labor 119,200 48,000 167,200 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Activity Level M-008 М-123 Cost Driver Costs Total Number of machine-hours $164,400 1,000 9,000 10,000 Number of production runs 80,000 10 30 40 Number of inspections 90,000 25 25 50 Total overhead $334,400 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? b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? Complete this question by entering your answers in the tabs below. Required A Required B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text: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 $334,400. During that time, the company produced 14,900 units of the M-008 and 2,400 units of the M-123. The direct
costs of production were as follows.
М-008
М-123
Total
Direct materials $119,200 $ 96,000
48,000
$215,200
Direct labor
119,200
167,200
Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as
follows.
Activity Level
М-123
Cost Driver
Costs
M-008
Total
Number of machine-hours
$164,400
1,000
9,000 10,000
Number of production runs
Number of inspections
80,000
10
30
40
90,000
25
25
50
Total overhead
$334,400
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?
b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost
per unit produced for each product?
Complete this question by entering your answers in the tabs below.
Required A
Required B
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 "Total unit cost" to 2 decimal places.)
M-008
M-123
Total overhead
Total unit cost
Required A
Required B
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A
Required B
How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total
cost per unit produced for each product? (Round "Total unit cost" to 2 decimal places.)
M-008
M-123
Total overhead
Total unit cost
< Required A
Required B >
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