Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Office Products Ltd manufactures two different multifunction printers ( MFPs ) for the business market. Cost estimates for the two models for the current year

Office Products Ltd manufactures two different multifunction printers (MFPs) for the business market.
Cost estimates for the two models for the current year are as follows:
Basic Advanced
Direct material $ 800 $1600
Direct labour (*)600600
Manufacturing overhead (**)800800
Total $2,200 $3,000
* Direct labour cost is $30 per direct labour hour.
** The predetermined plantwide overhead rate is $40 per direct labour hour.
Each model of MFP requires 20 hours of direct labour. The basic model requires 5 hours in department
A and 15 hours in department B. The advanced model requires 15 hours in department A and 5 hours
in department B. The budgeted overhead costs in these two production departments are as follows:
Department A Department B
Variable overhead $32 per direct labour hour $8 per direct labour hour
Fixed overhead $400,000 $400,000
The management expects to operate at a level of 20,000 direct labour hours in each production
department during the current year.
From next year onwards, the company has planned to implement an activity-based costing system for
its manufacturing overhead costs, with the activity cost pools and activity driver data below.
Activity drivers
Activity Activity cost Total Basic model Advanced model
Machine setup $ 200,000200 setups 50 setups 150 setups
Material receiving 120,00080,000 kilograms 30,000 kilograms 50,000 kilograms
Inspection 160,0001,600 inspections 700 inspections 900 inspections
Machinery-related 840,00060,000 MH*20,000 MH 40,000 MH
Engineering 280,0007,000 EH3,000 EH 4,000 EH
Total overhead $1,600,000
* MH = machine hours.
EH = engineering hours.
The company plans to produce 1,000 units for each model of MFP.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: kieso, weygandt and warfield.

14th Edition

9780470587232, 470587288, 470587237, 978-0470587287

More Books

Students also viewed these Accounting questions

Question

What sector and functional experience are we looking for?

Answered: 1 week ago