Magile Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining, Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,260,000 based on production of 340,000 handheld consoles and 107,000 home consoles Direct labor and direct materials costs were as follows. Handhela Total Direct labor $1,190,000 $385,000 $1,575,000 650,000 1,428,000 Home Materials 770,000 Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows Cost Driver Number of production runs Quality tests performed Shipping orders processed Total overhead Costa osigned $630,000 476,000 154,000 $1,260,000 Activity Level Handheld Home 40 5 22 16 100 40 Total 45 28 140 Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? Answer is complete but not entirely correct. rnmatthieutinn hu antar nere in the rahe hain Number of production runs Quality tests performed Shipping orders processed Total overhead $630,000 476,000 154,000 $1,260,000 40 12 100 5 16 40 45 28 140 Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total Cost per Unit" to 2 decimal places.) Total Cost per Unit 2.57 Overhead S 874,000 5 386,000 Handheld Home $ $ 3.61 UR overnd 260.000 equired: How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total ost per unit produced for each product? -. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B How much overhead will be assigned to each product of direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Do not round Intermediate calculations. Round "Total cost per unit to 2 decimal places.) Total Cost Overhead per Unit Handheld 952.000 2.80 Home $ 308,000 $ 2.88
