Trombly Travel Products (TTP) manufactures and sells travel bags and accessories. TTP produces backpacks at its West Street plant. The different backpack models are identified by the primary material used: canvas, nylon, or leather. The company uses a plantwide rate based on direct laborhours. The plantwide rate is $5.00 per labor-hour. All direct labor at TTP is paid $25 per hour. Canvas and nylon backpacks are produced in Department 1. Leather backpacks are produced in Department 2. The product costs (per backpack) follow.

Required

a. Compute the total unit cost of each backpack model using the plantwide allocation method.

b. The machines in Department 1 are older and almost fully depreciated. The equipment in Department 2 was recently updated, and the process in Department 2 is more highly automated. At the request of the manager of Department 1, a cost analyst at TTP provided the following information on overhead costs, machine-hours, and direct labor-hours for the two departments.

Using labor-hours as the department allocation base for Department 1 and machine-hours as the department allocation base for Department 2, compute the allocation rate for each. 

c. Compute the unit cost of each model of backpack using the department allocation rates computed in requirement (b) (labor-hours in Department 1 and machine-hours in Department 2).

d. Which costing method would you recommend for TTP: plantwide rates or department rates? Explain.

Transcribed Image Text:

Direct materials. Direct labor.... Canvas $20.00 37.50 Nylon $25.00 50.00 Leather $35.00 55.00