Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions...
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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 $280,800. During that time, the company produced 10,300 units of the M-008 and 2,900 units of the M-123. The direct costs of production were as follows. Direct materials Direct labor M-008 $ 82,400 M-123 $116,000 82,400 58,000 Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Total $ 198,400 140,400 Costs $103,300 80,000 97,500 $280,800 Activity Level M-008 8,000 2,000 20 10 M-123 Total 10,000 20 40 40 50 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 $280,800. During that time, the company produced 10,300 units of the M-008 and 2,900 units of the M-123. The direct costs of production were as follows. Direct materials Direct labor M-008 $ 82,400 M-123 $116,000 82,400 58,000 Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Total $ 198,400 140,400 Costs $103,300 80,000 97,500 $280,800 Activity Level M-008 8,000 2,000 20 10 M-123 Total 10,000 20 40 40 50
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Required A Allocating Overhead Using Cost Drivers For this approach youll allocate overhead based on ... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
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