Doaktown Products manufactures fishing equipment forrecreational uses. The Miramichi plant produces the
company’s twoversions of a special reel used for river fishing. The two modelsare the M-008, a basic reel, and the M-123, a new and improvedversion. Cost accountants at
company headquarters have preparedcosts for the two reels for the most recent period. The plantmanager is concerned. The cost report does not coincide with herintuition about the relative costs of the two models. She has askedyou to review the cost accounting and help her prepare a responseto headquarters. Manufacturing overhead is currently assigned toproducts based on their direct labor costs. For the most recentmonth, manufacturing overhead was $310,400. During that time, thecompany produced 12,400 units of the M-008 and 2,800 units of theM-123. The direct costs of production were as follows. M-008 M-123Total Direct materials $ 99,200 $ 112,000 $ 211,200 Direct labor99,200 56,000 155,200 Management determined that overhead costs arecaused by three cost drivers. These drivers and their costs forlast year were as follows. Activity Level Cost Driver Costs M-008M-123 Total Number of machine-hours $ 130,400 8,000 2,000 10,000Number of production runs 80,000 20 20 40 Number of inspections100,000 10 40 50 Total overhead $ 310,400
Required: a. How much overhead will be assigned to each productif these three cost drivers are used to allocate overhead? What isthe total cost per unit produced for each product?
- Doaktown Products Manufactures Fishing Equipment For Recreational Uses The Miramichi Plant Produces The Company S Two V 1 (47.2 KiB) Viewed 35 times
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 $310,400. During that time, the
company produced 12,400 units of the M-008 and 2,800 units of the M-123. The direct costs of production were as follows. Direct materials Direct labor M-008 $ 99,200 M-123 $112,000 99,200 56,000 Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Total $ 211,200 155,200 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Activity Level Costs M-008 $130,400 8,000 80,000 20 100,000 10 $310,400 M-123 Total 2,000 10,000 20 40 40 50 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?