Question
Check the attachments for a better view of the questions. [The following information applies to the questions displayed below.] For many years, Yelena Company manufactured
Check the attachments for a better view of the questions.
[The following information applies to the questions displayed below.]
For many years, Yelena Company manufactured a single product called a Mono-Relay. Then three years ago, the company automated a portion of its plant and at the same time introduced a second product called a Bi-Relay that has become increasingly popular. The Bi-Relay is a more complex product, requiring 1.00 hour of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The Mono-Relay requires only 0.50 hour of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. |
Despite the growing popularity of the company?s new Bi-Relay, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company?s costing system. Materials and labor costs per unit are given below: |
Mono-Relay | Bi-Relay | |||||
Direct materials | $ | 70.00 | $ | 85.00 | ||
Direct labor (0.50 hour and 1.00 hour @ $19.00 per hour) | $ | 9.50 | $ | 19.00 |
Management estimates that the company will incur $758,400 in manufacturing overhead costs during the current year and 18,000 units of the Mono-Relay and 7,000 units of the Bi-Relay will be produced and sold. |
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