Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bullions Enterprises Inc. (BEI) makes gold, silver, and bronze medals used to recognize outstanding athletic performance in regional and national sporting events. The per-unit direct

Bullions Enterprises Inc. (BEI) makes gold, silver, and bronze medals used to recognize outstanding athletic performance in regional and national sporting events. The per-unit direct costs of producing the medals follow:

Gold - Direct materials, $300; Labor, $120

Silver - Direct materials, $130; Labor, $120

Bronze - Direct materials, $35; Labor, $120

During Year 6, BEI made 1,200 units of each type of medal for a total of 3,600 medals. All medals are created through the same production process and they are packaged and shipped in identical containers. Indirect overhead costs amounted to $324,000. BEI currently uses the number of units as the cost driver for the allocation of overhead cost. As a result, BEI allocated $90 ($324,000 / 3,600 units) of overhead cost to each medal produced.

The president of the company has questioned the wisdom of assigning the same amount of overhead to each type of medal. He believes that overhead should be assigned on the basis of the cost to produce the medals. In other words, more overhead should be charged to expensive gold medals, less to silver, and even less to bronze. Assume you are BEIs chief financial officer. Write a memo responding to the presidents suggestion.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bucks The Next Step Advanced Medical Coding And Auditing

Authors: Elsevier

1st Edition

0323874118, 978-0323874113

More Books

Students also viewed these Accounting questions

Question

22. Why is tPA not helpful in cases of hemorrhagepg78

Answered: 1 week ago

Question

Find dy/dx if x = te, y = 2t2 +1

Answered: 1 week ago