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Ford Motor Company produces three models: Fiesta, Focus, and Mustang. The cost details for each model are as follows: Model Direct Materials Direct Labor Overhead

Ford Motor Company produces three models: Fiesta, Focus, and Mustang. The cost details for each model are as follows:

Model

Direct Materials

Direct Labor

Overhead Rate (% of Direct Labor)

Fiesta

$10,000,000

$5,000,000

200%

Focus

$12,000,000

$6,000,000

200%

Mustang

$15,000,000

$7,500,000

200%

Requirements:

  1. Calculate the total manufacturing cost for each model.
  2. Determine the overhead costs allocated to each model.
  3. Prepare a detailed cost sheet for each model.
  4. Compute the gross profit if the selling price per unit is $20,000, $25,000, and $35,000 for Fiesta, Focus, and Mustang, respectively.
  5. Discuss the impact of overhead allocation on the pricing strategy.

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