considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing direct labor-hours. Koontz's overhead cost allocation based on controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products besed on sales doillars) 30,000 number of units produced and .old 3,0,00D $2,0DD, ODD $5,000,000 Cost of goods sold Cross margin Selling and administrative expenses set operating income (loss) 1-350.DDD 3.650.000 480.00p-200-00 (20,000) 170,000 159,00 Direct laborers are paid $20 per hour Direct materials cost $40 per unit for the Base moder and SSO per unit for the Advanced model Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the Molding Department would be allocated based on machine-hours and the overhead costs in its Assembly and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the folowing Iinformation company's 797,300 562,500 $3.350,000 Direct labor hours 20,000 10,000 30,000 15,000 5,000 Hachine hours 12,000 12,000 Required: 1. Using the plantwide approach: a. Calculate the plantwide overhead rate. b. Calculate the amount of overhead that would be assigned to each product 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead that would be assigned to each product c. Using your departmental overhead cost allocations, redo the controllers segmented income statement (continue to allocate selling and administrative expenses based on sales dollars) 3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows Activity Heasure Dizect labor hours in Assenble and Pack Setup hours tivity 417,500 282, 300o 230.000 Assenble and paek Order processing Setups Other (unused eapaciey) of eustomer orders She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model ts traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in neture. Using the additional information provided by the production manager, calculate a. An activity rate for each activity cost pool b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the actvity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibt68(Hint: Organize all of the company's costs into three categories vanade egenses traceable bed epene and common fixed expenses) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in doilar sales for the Advanced model
