Peter & Bondra are production managers at the Peter Bondra Pty Ltd trailer factory in Digby, NS, Canada. Both managers use predetermined overhead application rates to apply manufacturing overhead to their production. To calculate their application rates Peter uses material cost while Bondra uses direct labour cost. ACTUAL production and production information Peter Manufacturing overhead $237,500 Units 9,000 Machine hours 7,500 Material cost Direct labour hours 6,000 Direct labour cost $245,500 Bondra $211,500 6,000 9,000 $15,500 9,000 $212,500 $14,500 BUDGETED production and cost data Peter Manufacturing overhead $236,500 Units 8,500 Machine hours 9,000 Material cost $13,500 Direct labour hours Direct labour cost $210,500 Bondra $201,500 9,500 5,000 $15,500 6,500 $211,000 6,000 1. 2. 3 4. 5. 6. 7. 8. REQUIRED: Compute Peter's predetermined overhead application rate. Compute Bondra's predetermined overhead application rate. Compute Peter's overhead applied. Compute Bondra's overhead applied. Compute Peter's over (under) application of overhead. Compute Bondra's over (under) application of overhead. Compute Peter's cost per unit of production. Use actual labour & material and applied overhead. Compute Peter's cost per unit of production. Use actual labour & material and applied overhead. 16.38 1.00 221120.69 210007.06 - 15379.31 8507.06 52.37 45.95 Don't worry about rounding your answers. Feel free to leave all your answers in their un-rounded format. Sidney Crosby operates a bed & breakfast hotel in Banff, Alberta, Canada. His forecasts for next year follow: Monthly rental costs $15,000 Maintenance & cleaning staff hourly wage rate $45 Cleaning staff hours per room rental 0.5 Security contract (3 years at $10,000 per year) $30,000 Cost of food per room rental $8 Average room rental revenue $60 Monthly average no. of room rentals 500 REQUIRED: Calculate the number of room rentals per year that Sidney needs to break even. Calculate the annual sales revenue required to break even. Calculate the annual number of room rentals required to earn a profit before tax of $50,000. Sidney is considering an upgrade of his business to attract more customers and to increase his profits. He plans to increase his food costs by $10 per room rental as he thinks this will allow him to increase his average room rental rate by $25. Calculate Sidney's new break-even number of room rentals. 1. 2. 3. 4. 6440.677966 386440.678 8135.59322 4269.662921 5 4719.101124 Sidney's plan to increase the room rental rate will require repair costs of $20,000. What is the annual break-even number of room rentals with this additional cost ? 6. Calculate Sidney's annual margin of safety for Required 5. Show this value as the number of room rentals. 1,280.90
