I only need help with question number 5

Koontz Company manufactures two models of industrial componentsa Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontzs controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars):

	Basic			Advanced			Total
Number of units produced and sold		20,000			10,000		30,000
Sales	$	3,000,000		$	2,000,000	$	5,000,000
Cost of goods sold		2,300,000			1,350,000		3,650,000
Gross margin		700,000			650,000		1,350,000
Selling and administrative expenses		720,000			480,000		1,200,000
Net operating income (loss)	$	(20,000	)	$	170,000	$	150,000

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 companys 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			Assemble and Pack			Total
Manufacturing overhead costs	$	787,500		$	562,500	$	1,350,000
Direct labor hours:
Basic		10,000			20,000		30,000
Advanced		5,000			10,000		15,000
Machine hours:
Basic		12,000			-		12,000
Advanced		10,000			-		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 controllers segmented income statement (continue to allocate selling and administrative expenses based on sales dollars).

3. Koontzs production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the companys total manufacturing overhead cost to five activity cost pools as follows:

Activity Cost Pool	Activity Measure	Manufacturing Overhead
Machining	Machine-hours in Molding	$	417,500
Assemble and pack	Direct labor hours in Assemble and Pack		282,500
Order processing	Number of customer orders		230,000
Setups	Setup hours		340,000
Other (unused capacity)			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 companys 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.

4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 4-8. (Hint: Organize all of the companys 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.

Requirement 1A | Predetermined Overhead Rates Total Overheads $ 1,350,000 Total Labor Hours 45,000 Predetermined Overhead Rate 30 per Labor Hour Requirement 1B | Overheads allocated to Each under pre-determined OH Rate Particulars Molding Assemble Labor Hours 30,000 15,000 Predetermined Overhead Rate 30 Overhead Costs 900,000 $ 450,000 30 Assemble $ 562,500 Requirement 2A Departmental Overhead Rates Particulars Molding Overhead Costs 787,500 Machine Hours 22,000 Labor Hours Overhead Rate * $ 35.80 * Rounded Off to two decimal places 45,000 12.50 $ Requirement 2B | Overheads for Each Product Particulars Basic Molding 429,600 Assemble 375,000 Total 804,600 Advanced 358,000 187,500 545,500 $ Requirement 20 Segments Income Statement Particulars Basic Advanced Sales 3,000,000 $ 2,000,000 Cost of goods sold (See below) 2,204,600 $ 1,445,500 Gross Margin 795,400 $ 554,500 Selling and Administrative Expenses 720,000 $ 480,000 Net Operating Income 75,400 $ 74,500 A A A A A Bi-furcation of Cost of goods sold : Particulars Cost of goods sold Less : Overheads using Plantwide OH Rate Less : Direct Labor Less : Direct Materials Difference to to Basic Advanced 2,300,000 $ 1,350,000 900,000 $ 450,000 600,000 $ 300,000 800,000 $ 600,000 - $ Therefore, COGS for Departmental OH based Income Statement : Particulars Basic Advanced Direct Materials 800,000 $ 600,000 Direct Labor 600,000 $ 300,000 Overheads 804,600 $ 545,500 Cost of goods sold 2,204,600 $ 1,445,500 Requirement 3A, 3B | Activity Rate and Allocation of Overheads using ABC Costing Activity Overhead Cost Activity Drivers Activity Rate * Machining 417,500 22,000 Machine Hours $ 18.98 per Machine Hour $ Assemble and Pack 282,500 30,000 Direct Labor Hours $ 9.42 per Labor Hour $ Order Processing 230,000 250 Customer Orders $ 920.00 per Customer Order $ Setups 340,000 650 Setup Hours $ 523.08 per Setup Hour $ Others 80,000 $ 1,350,000 $ * Since, it is said to round the intermediate calculations, the Activity Rates are rounded to two decimals. Basic 227,760 188,400 46,000 26,154 Advanced $ 189,800 $ 94,200 $ 184,000 $ 313,848 th th th 488,314 $ 781,848 Total 5,000,000 Basic $ 3,000,000 Advanced 2,000,000 $ Requirement 4 Income Statement Particulars Sales Variable Expenses : Direct Material Direct Labor Variable Selling and Administrative Exp. Total Variable Expenses 1,400,000 $ 800,000 $ 900,000 $ 600,000 $ 350,000 $ 150,000 $ 2,650,000 $ 1,550,000 $ 600,000 300,000 200,000 1,100,000 Contribution Margin $ 2,350,000 $ 1,450,000 $ 900,000 Traceable Fixed Costs : Manufacturing Overheads Selling and Administrative Expenses Total Traceable Fixed Costs to 1,270,162 $ 350,000 $ 1,620,162 $ 488,314 $ 150,000 $ 638,314 $ 781,848 {Activity rates are rounded off while calculating this} 200,000 981,848 811,686 $ -81,848 Segment Contribution Margin Other Fixed Costs Net Operating Income 729,838 $ 580,000 149,838 a