5-15 and explain why the existing system may be inadequate. TDABC in a manufacturing organization Sigma Company produces three versions of a brass (L01,3) desk lamp: basic, custom, and deluxe. The planned production information for the upcoming month follows: COST PER MONTH FRINGE BENEFITS HOURS PER MONTH TOTAL RESOURCES Direct labor Indirect labor. Machinery $ 4,270 $ 4,210 $50,000 $800 S600 $ 5,070 $ 4,810 $50,000 130 130 250 BASIC CUSTOM DELUXE $190 Selling price per unit. Direct materials cost per unit $170 $ 40 $230 $ 55 $ 50 continued 3 Activity-Based Costi continued from previous page BASIC CUSTOM DELUXE 3,200 2.50 8,000 0.08 PRODUCTION INFORMATION Production and sales volume (units). Direct labor hours per unit... Total direct labor hours. Machine hours per unit Total machine run time (hours) Number of production runs.. Setup time per production run (machine hours). Total setup time (machine hours) Total machine hours .. 4,500 2.00 9,000 0.05 225 12.00 2.00 24.00 249 256 1,200 3.00 3,600 0.09 108 8.00 2.50 20.00 128 10.00 1.00 10.00 266 INDIRECT LABOR DATA Setup time per run (hours) 3.00 4.00 6.00 Number of employees per setup. 4 Indirect labor hours per setup. 12.00 16.00 24.00 In order to meet anticipated demand for the upcoming month, Sigma Company plans to rent three machines, each costing $50,000 per month, and hire four indirect workers, each costing $4,810 per month. The total cost of the three machines and four indirect workers comprises the total overhead cost at Sigma Company. Required (a) Given the production plan, what is the deluxe product's planned total contribution margin? (b) If Sigma Company computes a plantwide rate to allocate total overhead cost to the three products by dividing the sum of indirect labor cost and machine cost by planned total direct labor hours, what is the total overhead cost that will be allocated to the deluxe product, and what will be its resulting gross margin? (c) If Sigma Company uses TDABC to allocate the indirect labor cost and the machine cost to the three products, what will be the total overhead cost allocated to the deluxe product, and what will be its resulting gross margin? 5-15 and explain why the existing system may be inadequate. TDABC in a manufacturing organization Sigma Company produces three versions of a brass (L01,3) desk lamp: basic, custom, and deluxe. The planned production information for the upcoming month follows: COST PER MONTH FRINGE BENEFITS HOURS PER MONTH TOTAL RESOURCES Direct labor Indirect labor. Machinery $ 4,270 $ 4,210 $50,000 $800 S600 $ 5,070 $ 4,810 $50,000 130 130 250 BASIC CUSTOM DELUXE $190 Selling price per unit. Direct materials cost per unit $170 $ 40 $230 $ 55 $ 50 continued 3 Activity-Based Costi continued from previous page BASIC CUSTOM DELUXE 3,200 2.50 8,000 0.08 PRODUCTION INFORMATION Production and sales volume (units). Direct labor hours per unit... Total direct labor hours. Machine hours per unit Total machine run time (hours) Number of production runs.. Setup time per production run (machine hours). Total setup time (machine hours) Total machine hours .. 4,500 2.00 9,000 0.05 225 12.00 2.00 24.00 249 256 1,200 3.00 3,600 0.09 108 8.00 2.50 20.00 128 10.00 1.00 10.00 266 INDIRECT LABOR DATA Setup time per run (hours) 3.00 4.00 6.00 Number of employees per setup. 4 Indirect labor hours per setup. 12.00 16.00 24.00 In order to meet anticipated demand for the upcoming month, Sigma Company plans to rent three machines, each costing $50,000 per month, and hire four indirect workers, each costing $4,810 per month. The total cost of the three machines and four indirect workers comprises the total overhead cost at Sigma Company. Required (a) Given the production plan, what is the deluxe product's planned total contribution margin? (b) If Sigma Company computes a plantwide rate to allocate total overhead cost to the three products by dividing the sum of indirect labor cost and machine cost by planned total direct labor hours, what is the total overhead cost that will be allocated to the deluxe product, and what will be its resulting gross margin? (c) If Sigma Company uses TDABC to allocate the indirect labor cost and the machine cost to the three products, what will be the total overhead cost allocated to the deluxe product, and what will be its resulting gross margin
