PROBLEM 1 Howlett and Gambit manufactures microwaves and refrigerators. Microwaves are relatively simple to produce and are made in large quantities, while the refrigerators are customized to individual wholesale customer specifications.

The following information were prepared by the Cost Accountant: 1. The company produces and sells 150,000 microwaves ($9,750,000 in revenues) and 15,000 refrigerators ($8,925,000). 2. The direct materials and direct labor ($20 per labor hour) is $2,000,000 and $1,400,000 for the microwaves, respectively. 3. The direct materials and direct labor ($20 per labor hour) is $1,350,000 and $3,000,000 for the refrigerators, respectively. 4. Manufacturing Overhead is $1,980,000, and administrative expenses equal $3,795,000.

REQUIRED

1. Using the traditional cost allocation system and number of units produced as the basis, what amount of overhead will be allocated to microwaves?

2. Using the traditional cost allocation system and direct labor hours as the basis, what amount of overhead will be allocated to Microwaves?

3. Using the traditional cost allocation system and direct labor hours as the basis, what is the Total Manufacturing Cost of Microwaves?

4. Assuming that the Full Costing policy of the company is to allocate Manufacturing Overhead using the Direct Labor Hours as basis and Administrative Expenses using number of units produced, determine the amount of overhead cost that will be allocated to Microwaves.

5. In relation to the previous number, determine the selling price per unit of microwave with a markup of 300%. The basis of the mark-up should be at least sufficient for the company to recover the total product cost.

6. Assuming that the Full Costing policy of the company is to allocate Administrative Expenses using the labor hours as basis and Manufacturing Overhead using number of units produced, what is the full cost (total) in producing and selling Microwaves?

7. In relation to the previous number, determine the selling price per unit of microwave with a markup of 500%. The basis of the mark-up should be at least sufficient for the company to recover the cost and target profit.