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