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please explain steps in a way a non smart person will not understand. im really crying over this. Problem 5-46 Ontario, Inc., manufactures two products,
please explain steps in a way a non smart person will not understand. im really crying over this.
Problem 5-46 Ontario, Inc., manufactures two products, Standard and Enhanced and applies overhead on the basis of Activity-Based Costing: Cost direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are Analysis $800,000 and 25.000 hours, respectively. Information about the company's products follows. (LO 5-1,5-2,5-4,5-5,5-7) Standard: 1 Total cost standard: $157 Estimated production volume, 3,000 units 2. Manufactured cost, stan: Direct-material cost, $25 per unit dard init: 5881 Direct labor per unit, 3 hours at S12 per hour Enhanced Estimated production volume 4,000 units Direct-material cost $40 per unit Direct labor per unit, 4 hours at $12 per hour Ontario's overhead of $800,000 can be identified with three major activities order processing ($150,000). machine processing (S560,000). and product inspection ($90.000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Orders Processed 300 Standard Enhanced Total Machine Hours Worked 18,000 22.000 40.000 Inspection Hours 2.000 8.000 10.000 200 500 Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a mas- sive plant renovation during which new, highly automated machinery was installedmachinery that was expected to produce significant operating efficiencies. Chapter 5 Activity-Based Costing and Management Please break down the steps: it take to figure; out the answer I'm so lost Required: 1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufactur- ing costs of the Standard and Enhanced products if the expected manufacturing volume is astained. 2. Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained. 3. Ontario's selling prices are based heavily on cost. a. By using direct-labor hours as an application hase, which product is overcosted and which product is undercosted? Calculate the amount of the cost distortion for each product. b. Is it possible that overcosting and undercosting (i.e., cost distortion) and the subsequent deter- mination of selling prices are contributing to the company's profit woes? Explain. 4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements 1. 2. and 3(a) above. Show how the solution will change if the following data change the overhead associated with order processing is $300,000 and the overhead associated with product inspection is $270.000 Step by Step Solution
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