Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model.
Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's 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 following information: Molding $ 787,500 Assemble and Pack $ 562,500 Total $1,350,000 Manufacturing overhead costs Direct labor hours: Basic Advanced Machine hours: Basic Advanced 10,000 5,000 20,000 10,000 30,000 15,000 12,000 10,000 12,000 10,000 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 controller's 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 Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding Direct labor hours in Assemble and Pack Number of customer orders Setup hours Manufacturing Overhead $ 417,500 282,500 230,000 340,000 80,000 $1,350,000 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. Its 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 nature. 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 activity-based approach. sed cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 7-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. Req 1A Req 1B Req 2A Req 2B Req 2c Req 3A Req 3B Req 30 Reg 4 Reg 5 Calculate the plantwide overhead rate. Plantwide overhead rate per DLH Req 1A Req 1B Req 2A Req 2B Req 2c Req Req 3B Req 3C Req 4 Req 5 Calculate the amount of overhead that would be assigned to each product. Basic Advanced Amount of overhead Req 1A Req 1B Req 2A Req 2B Req 2C Req Req 3B Req 30 Req 4 Req 5 Calculate the departmental overhead rates. (Round your answers to 2 decimal places.) Molding Department per MH Assemble and Pack Department per DLH Manufacturing overhead rate Req 1A Req 1B Reg 2A Req 2B Req 20 Req 3A Req 3B Req 3C Req 4 Reg 5 Calculate the total amount of overhead that would be assigned to each product. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Molding Department Assemble and Pack Department Total manufacturing overhead assigned $ 0 $ Req 1A Req 1B Req 2A Req 2B Req 20 Req Req 3B Req 30 Req 4 Reg 5 Calculate an activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Machining Assemble and pack Order processing Setups Activity Rate per MH per DLH per order per hour Req 1A Req 1B Req 2A Reg 2B Req 2c Req 3A Req 3B Req 3C Req 4 Req 5 Calculate the total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity- based approach. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Machining Assemble and pack Order processing Setups Total overhead cost assigned $ 0 $ Req 1A Req 1B Reg 18 ReqzA Req 2A Req 2B Req2B Reqzc Req 2c Req3A Req Req 3B Req3B Req3c Req 3C Req 4 Rega Req5 Req 5 Calculate the total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. Basic Advanced Total traceable selling and administrative cost Req 1A Req 1B Req 2A Req 2B Req 2C Reg 3A Req 3B Req 3C Reg 4 Reg 5 Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement. (Round your intermediate calculations to 2 decimal places.) Koontz Company Income statement Total Basic Advanced Variable expenses: Total variable expenses 0 Traceable fixed expenses: Total traceable fixed expenses Segment margin Common fixed expenses: $ 0 $ 0 Total common fixed expenses Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Req 2c Req 3A Req 3B Req 3C Req 4 Req 5 Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. (Round your intermediate calculations to 2 decimal places. Round your final answer to the nearest whole dollar.) Break-even point in dollar sales
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started