McNulty, Inc, produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 25 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost Manufacturing overhead for year 1 totaled $885,000 Overhead is allocated to products based on direct labor cost. Data for year 1 show the following Sales revenue Direct materials Direct labor Chairs $1,341,600 593,000 210,000 Desks $2,392,000 890,000 380,000 Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks. a-2. Which of the two products should be dropped? b. Regardless of your answer in requirement (@), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $740,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? Complete this question by entering your answers in the tabs below. Req A1 Reg A2 Reg B Based on the CFO's new policy, calculate the profit margin for both chairs and desks. Profit Margin Chairs Desks % Isadore's Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the following data Cost Driver Volume Activity Cost Driver Cost Pencils Pens Setting up Number of setups $ 72,000 20 30 Inspecting Number of parts 21,600 6 Packing and shipping Number of boxes shipped 43,200 45,000 75,000 Total overhead $136,800 4 Required: a. Compute the amount of overhead to be allocated to each product under activity-based costing b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.1 for pencils and 0.2 for pens and that 45,000 boxes of pencils and 75,000 boxes of pens were produced during the period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the amount of overhead to be allocated to each product under activity-based costing (Do not round Intermediate calculations.) Overhead Pencils Pens ilmule Required B > The manager of the Personnel Department at City Enterprises has been reading about time-driven ABC and wants to apply it to her department. She has identified four basic activities her employees spend most of the their time on: Interviewing, Hiring, Assessment, and Separation Processing. The department employs five staff who perform these activities. The manager provides the following estimates for the amount of time it takes to complete each of these activities: Interviewing: 45 minutes Hiring: 60 minutes. Assessment: 75 minutes. Separation Processing: 90 minutes. . Employees in Personnel Work 35-hour weeks with four weeks for vacation of the 35 hours, five are reserved for administrative tasks, training, and so on. The costs of the Personnel Department, including any allocated costs from other staff functions, are $972,000 During the year, Personnel conducted 1,200 interviews, made 375 hires, made 3,000 assessments, and had 250 separations, Required: a. What is the cost minute for activities in Personnel? (Round your answer to 2 decimal places.) b. What is the cost of interviewing and hiring one employee? (Round your intermediate calculations and final answer to 2 decimal places.) c. How many minutes of unused capacity did Personnel have for the year? d. What was the cost of the unused capacity in Personnel? (Round your intermediate calculations to 2 decimal places.) 6. Cost per minute b Total costs Unused minutes d Cost of unused capacity Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 100 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows, Baseball Bats Tennis Rackets Sales revenue $1,540,000 $1,000,000 Direct labor 340,000 170,000 Direct materials 561,000 283,000 Required: a. Compute the profit for each product using plantwide allocation. b. Maria, the manager of Department T was convinced that tennis rackets were really more profitable than baseball bats. She asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have had a rate of 50 percent of direct labor cost and Department T would have had a rate of 200 percent of direct labor cost Recompute the profits for each product using each department's allocation rate (based on direct labor cost) Pront Baseball Tennis Bats Rackets a Using plantwide allocation b. Using department's allocation rate
