Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low-cost, reliable input devices. The company only recently

Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low-cost, reliable input devices. The company only recently began producing the higher-quality wireless 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 $360,000 based on production of 140,000 wired mice and 50,000 wireless mice. Direct labor and direct materials costs were as follows:

Wired Wireless Total
Direct labor $ 290,100 $ 109,900 $ 400,000
Materials 187,500 171,000 358,500

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
Cost Driver Costs Assigned Wired Wireless Total
Number of production runs $ 165,000 20 5 25
Quality tests performed 148,500 6 9 15
Shipping orders processed 46,500 50 25 75
Total overhead $ 360,000
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

Wired $______________ $__________________

Wireless $______________ $__________________

(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? (Round "Total Cost Per Unit" to 2 decimal places.)

Overhead Total Cost Per Unit

Wired $_____________ $________________

Wireless $_____________ $________________

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

Python For Finance

Authors: Yves Hilpisch

2nd Edition

1492024333, 978-1492024330

More Books

Students also viewed these Finance questions