Required:

2. Using a departmental approach:

a. Calculate the departmental overhead rates.

b. Calculate the total amount of overhead that would be assigned to each product.

c. Using your departmental overhead cost allocations, redo the controllers segmented income statement (continue to allocate selling and administrative expenses based on sales dollars).

3. Koontzs production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the companys total manufacturing overhead cost to five activity cost pools as follows:

She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model.

The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the companys selling and administrative costs are organization-sustaining in nature.

Using the additional information provided by the production manager, calculate:

a. An activity rate for each activity cost pool.

b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach.

4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 7-8. (Hint: Organize all of the companys costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.)

5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model.

Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic 20,000 Advanced 10,000 Total 30,000 Number of units produced and sold Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) $3,000,000 2,300,000 700,000 720,000 $ (20,000) $2,000,000 1,350,000 650,000 480,000 $ 170,000 $5,000,000 3,650,000 1,350,000 1,200,000 $ 150,000 Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assembly and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Molding $ 787,500 Assemble and Pack $ 562,500 Total $ 1,350,000 Manufacturing overhead costs Direct labor hours: Basic Advanced Machine hours: Basic Advanced 10,000 5,000 20,000 10,000 30,000 15,000 12,000 10,000 12,000 10,000 Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Assemble and pack Activity Measure Machine-hours in Molding Direct labor hours in Assemble and Pack Number of customer orders Setup hours Manufacturing Overhead $ 417,500 282,500 230,000 340,000 80,000 $1,350,000 Req 1A Req 1B Req 2A Req 2B Req 20 Req 3A Req 3B Req 3C Reg 4 Req 5 Calculate the departmental overhead rates. (Round your answers to 2 decimal places.) Molding Department per MH Assemble and Pack Department per DLH Manufacturing overhead rate Req 1A Req 1B Req 2A Req 2B Reg 20 Req Req 3B Req 3C Reg 4 Reg 5 Calculate the total amount of overhead that would be assigned to each product. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Molding Department Assemble and Pack Department Total manufacturing overhead assigned $ 0 $ 0 Req 1A Req 1B Req 2A Req 2B Req 2c Req 3A Req 3B Req 3C Reg 4 Reg 5 Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). (Round your intermediate calculations to 2 decimal places.) Basic Advanced Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Req 1A Reg 1B Req 2A Req 2B Req 2c Req Req 3B Req 30 Reg 4 Reg 5 Calculate an activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Machining Assemble and pack Order processing Setups Activity Rate per MH per DLH per order per hour Req 1A Req 1B Req 2A Req 2B Req 2C Req 3A Req 3B Req 3C Req 4 Reg 5 Calculate the total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity- based approach. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Machining Assemble and pack Order processing Setups Total overhead cost assigned $ 0 $ - Req3A Req3C > Reg 1A Reg 1B Req 2A Req 2B Req 2C Req 3A Req 3B Req 3C Req 4 Reg 5 Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement. (Round your intermediate calculations to 2 decimal places.) Koontz Company Income statement Total $ 5,000,000 Basic Advanced 3,000,000 $ 2,000,000 $ Sales Variable expenses: Direct materials Direct labor 800,000 600,000 600,000 300,000 Sales commissions 150,000 200,000 1,550,000 1,450,000 1,100,000 900,000 Total variable expenses Contribution margin Traceable fixed expenses: Advertising 150,000 150,000 200.000 Total traceable fixed expenses Segment margin Common fixed expenses: 150,000 1,300,000 200,000 700,000 | $ $ Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Reg 20 Req 3A Req 3B Req 30 Reg 4 Reg 5 Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. (Round your intermediate calculations to 2 decimal places. Round your final answer to the nearest whole dollar.) Break-even point in dollar sales