Product-Costing Accuracy, Consumption Ratios Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under
Question:
Product-Costing Accuracy, Consumption Ratios
Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs:
Setting up equipment | $3,000 |
Machining | 18,000 |
The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production.
Elegant | Fina | |
Direct labor | $9,000 | $3,000 |
Direct materials | $3,000 | $3,000 |
Units | 3,000 | 3,000 |
Machine hours | 500 | 4,500 |
Setup hours | 100 | 100 |
Required:
1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain. Yes. Because direct materials and direct labor are directly traceable to each product, their cost assignment should be accurate.
2. Calculate the consumption ratios for each activity. Round to two decimal places.
Elegant | Fina | |
Machining | fill in the blank 2 | fill in the blank 3 |
Setups | fill in the blank 4 | fill in the blank 5 |
3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round rates to the nearest cent.
Elegant | $fill in the blank 6 per briefcase |
Fina | $fill in the blank 7 per briefcase |
3b. Based on your calculations above which of the following statements is correct? More machine and setup costs are assigned to Fina than Elegant.
4. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round your answers to the nearest cent.
Elegant | $fill in the blank 9 per unit |
Fina | $fill in the blank 10 per unit |