Koontz Company manufactures two models of Industrial components-a 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. Koontz's 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 unita produced and sold 20,000 10,000 30,000 Sales $3,000,000 $2,000,000 $5,000,000 Cort 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 Het operating income (los) (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 company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Holding 5.787,500 Au semble and Pack Total $ 562,500 $1,350,000 Manufacturing overhead conta Direct labor-hours i 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 four activity cost pools as follows: Activity Cost Pool Machining Assemble and pack Order processing Setups Activity Mensure Machine-hours in Molding Direct Labor-Hours in Assemble and Pack Number of customer ordern Setup hours Manufacturing Overhead $ 417,500 282,500 310,000 340,000 $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. 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. 4. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising expenses 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 common fixed expenses. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model Complete this question by entering your answers in the tabs below. Req1A Req 18 Req 2A Req 28 Reg 20 Req 3A Reg 38 Reg 4 Reg 5 Calculate the plantwide overhead rate. Planiwide onread rate 30 per DLH RIA Reg 18 >
