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Decision Situation #2 - Determining Product Cost and Profitability JDL Enterprises manufactures 3 different products within its Main Boards division at the Omaha location. To
Decision Situation #2 - Determining Product Cost and Profitability JDL Enterprises manufactures 3 different products within its Main Boards division at the Omaha location. To manufacture the Main Boards, each product requires materials, labor, and manufacturing overhead. Manufacturing overhead includes costs that are not traceable directly to the product, but they are part of the manufacturing process (such as factory rent, factory utilities, equipment depreciation, and materials handling). When each product is finished, the cost of each product will include all three costs (materials, labor, and overhead). While the materials and labor can be easily traced to each product line, it is more difficult to assign overhead to each product line. The Company has decided to use the following criteria to allocate the overhead: Overhead Cost Allocation Base Total Cost Factory Rent & Utilities Square Footage Occupied $80,000 Equipment Depreciation Number of Machine Hours $40,000 Materials Handling Number of parts $90,000 Using the data below, construct a spreadsheet to determine the cost and profitability of each product line. Product: #B24 (Units produced 3,000; Selling price $130 per unit) Cost of Materials: $60,000 Cost of Labor: $90,000 Overhead Data: Building Occupancy: 8,000 square feet Machine Hours: 4,000 hours Materials Handling: 9,000 parts Product: #J79 (Units produced 4,000; Selling Price $110 per unit) Cost of Materials: $70,000 Cost of Labor: $130,000 Overhead Data: Building Occupancy: 6,000 square feet Machine Hours: 3,000 hours Materials Handling: 7,000 parts Product: #R35 (Units produced 2,000; Selling Price $115 per unit) Cost of Materials: $40,000 Cost of Labor: $50,000 Overhead Data: Building Occupancy: 10,000 square feet Machine Hours: 7,000 hours Materials Handling: 8,000 parts
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