Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required information Skip to question [ The following information applies to the questions displayed below. ] Ferry Electronics produces a wide variety of video and

Required information
Skip to question
[The following information applies to the questions displayed below.]
Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants (Lakeview) produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in the quality of the components and capability to "fill" the room with sound.
The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected for the quarter follow:
Silver Gold Platinum Total
Units produced 2,0001,5005004,000
Machine-hours 5902,1001,0503,740
Direct labor-hours 6001,2007502,550
Revenues $ 583,600 $ 793,050 $ 493,350 $ 1,870,000
Direct materials costs 310,000533,250303,0001,146,250
Direct labor costs 9,60028,80025,35063,750
Manufacturing overhead 561,000
Operating Profit $ 99,000
The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing overhead among the products. The current cost accounting system allocates manufacturing overhead to products based on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better understanding of possible financial implications if demand should be weaker than expected.
The finance team decides that a two-stage system might improve the information available for management. They do an account analysis and determine that there appear to be two main drivers of overhead: revenue and direct costs. Based on the account analysis, the team splits the manufacturing overhead into two pools as follows:
Revenue-related overhead $ 176,341
Direct cost-related overhead 384,659
Total overhead $ 561,000
d. Compute total and per-unit profits by product line based on the expected (not breakeven) sales by product line using the two-stage cost allocation system developed by the finance team.
Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round "Unit profit (loss)" answers to 2 decimal places. Round your "Total profit (loss)" answers Required information
[The following information applies to the questions displayed below.]
Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants
(Lakeview) produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in
the quality of the components and capability to "fill" the room with sound.
The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected
for the quarter follow:
The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing
overhead among the products. The current cost accounting system allocates manufacturing overhead to products based
on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a
concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better
understanding of possible financial implications if demand should be weaker than expected.
The finance team decides that a two-stage system might improve the information available for management. They do an account
analysis and determine that there appear to be two main drivers of overhead: revenue and direct costs. Based on the account analysis,
the team splits the manufacturing overhead into two pools as follows: d. Compute total and per-unit profits by product line based on the expected (not breakeven) sales by product line using the two-stage
cost allocation system developed by the finance team.
Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round "Unit profit (loss)"
answers to 2 decimal places. Round your "Total profit (loss)" answers to nearest whole dollar.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Regulation In Japan Evolution And Development From 2001 To 2015

Authors: Masatsugu Sanada, Yoshihiro Tokuga

1st Edition

0367221071, 9780367221072

More Books

Students also viewed these Accounting questions

Question

Why do opaque materials become warmer when light shines on them?

Answered: 1 week ago

Question

4 What are the main practices associated with SHRM?

Answered: 1 week ago