Question
Metal Millers Co. manufacturers and sells machinery parts. The Company has four main, but differently made, products bolts, router bits, benchtops, and aluminum framing. The
Metal Millers Co. manufacturers and sells machinery parts. The Company has four main, but differently made, products bolts, router bits, benchtops, and aluminum framing. The Company expects to make the following number of units for each product and expects the applicable overhead costs for each product as follows:
Expected Production Units | Expected overhead Units Costs | |
Bolts | 150,000 | 60,000 |
Router Bits | 10,000 | 20,000 |
Benchtops | 1,200 | 7,200 |
Aluminum Framing | 470 | 5,640 |
A. Calculate the Overhead Application Rate if Metal Millers Co. were to use a single application rate.
B. Calculate the Overhead Application Rates if Metal Millers Co. were to use an activity-based costing method. (Be sure to identify which rate is for each product).
(C) Which do you think is a better costing method for Metal Millers Co. Single Application Rate or Activity-Based Costing? Why? Which products are over costed or under costed using the single application rate (relative to Activity-Based Costing)?
For Questions D, E, and F, assume the following per unit costs for direct materials and direct labor. Also, assume the marketing department suggests the following sales prices for each product.
Direct Material Cost | Direct Labor Costs | Suggested Sales Price | |
Bolts | $0.20 | $0.55 | $2 |
Router Bits | $9.50 | $25.50 | $36.25 |
Benchtops | $70 | $100 | $220 |
Aluminum Framing | $60 | $220 | $520 |
D. Which product should no longer be produced by the company? Why?
E. Please calculated the per unit profit margin for each product? Which one product has the highest profit margin?
F. If all units produced are sold, is the product with the highest per unit margin the most profitable product for the company? Why or why not?
Please Show All Work. Thank you!
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