Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please give explanation on how to get each number, thanks! Exercise 9-37 Activity-Based versus Traditional Costing (LO 9-4, 5, 6) Maglie Company manufactures two video
Please give explanation on how to get each number, thanks!
Exercise 9-37 Activity-Based versus Traditional Costing (LO 9-4, 5, 6) Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,217,000 based on production of 340,000 handheld consoles and 117,000 home consoles. Direct labor and direct materials costs were as follows: Handheld Total Home Direct labor $1,111,250 720,000 $410,000 674,000 $1,521,250 1,394,000 Materials Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows: Activity Level Handheld Costs Assigned $ 450,000 580,000 187,000 $1,217,000 Cost Driver Home Total 45 Number of production runs Quality tests performed Shipping orders processed 35 10 13 110 16 29 60 170 Total overhead Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total cost per unit" to 2 decimal places.) Overhead Total Cost per Unit Handheld Home b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round "Total cost per unit" to 2 decimal places.) Overhead Total Cost per Unit Handheld HomeStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started