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 uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 ber 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. She also determined 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 company's seling 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 adapted from Exhibit 6-8. (Hint Organize all of the company's 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. She also determined the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The moiding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and thr 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 advertisin costs 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 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 totat manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approac 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 staternent adapted from Exhibit 6-8. (Hint Organize all of the company's 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
