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iew Policies Current Attempt in Progress Sheridan Manufacturing produces two products in its Saratoga plant, balzene and galvene. Since it opened its doors in 1965,

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iew Policies Current Attempt in Progress Sheridan Manufacturing produces two products in its Saratoga plant, balzene and galvene. Since it opened its doors in 1965, Sheridan has been using a single manufacturing overhead pool to accumulate overhead costs. Overhead has been allocated to products based on direct labor hours. Until recently, Sheridan was the sole producer of galvene in the country and was therefore able to dictate the selling price. However last year Marcella Products began marketing a comparable product at $58 per unit-a price that is below Sheridan's product cost. Sheridan's market share of galvene has declined rapidly as a result. The company's managers must now decide whether to meet the competitive price or discontinue the product. Sheridan's cost accountant has suggested that the company do an activity-based cost analysis before managers make the decision. The two main indirect costs of manufacturing balzene and galvene are power usage and setup costs. Most of the power usage occurs in the fabricating department: most of the setup costs are incurred in the assembly department. Setup costs are incurred predominantly in the production of balzene. The fabricating department has identified machine hours as the appropriate cost driver: the assembly department has identified setups as the appropriate cost driver. Direct labor rates are the same in both departments. The combined budget for manufacturing is as follows. Total Balzene 16.000 1 hours per unit $7.00 per unit Number of units Direct labor Direct material Overhead Indirect labor Galvene 16.000 2 hours per unit 52 per unit $1.080.000 550.000 Type here to search ORI Indirect labor Fringe benefits Indirect materials Power Setup Quality assurance Other utilities Depreciation $50,000 18,000 31,000 180,000 90,000 25,000 20,000 30,000 The cost accountant has prepared the following estimates of overhead usage by the two departments: Indirect labor Fringe benefits Indirect materials Power Setup Quality assurance Other utilities Depreciation Fabricating 75% 70% $20,000 $100,650 $20.000 65% 60% 8096 Assembly 25% 3096 $11,000 $79,350 $70,000 35% 4096 2096 Activity Base Usage Balzene Machine Hours 4 MH unit Setups 1.000 0 Bi Type here to search Activity Base Usage Balzene Galvene Machine Hours 4 MH/unit 6 MH/unit Setups 1,000 250 (a) Calculate the unit costs of balzene and galvene using the current overhead allocation basis of direct labor hours. (Round overhead rate and final answers to 2 decimal places, eg. 15.25.) Balzene Galvene Cost per unit $ $ e Textbook and Media Attempts: 0 of 3 used Submit Ang Save for Later w a V Type here to search

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