Thanks for the hep! :)
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 ofthe 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 ofthe company's selling and administrative costs are organizationsustaining 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 activitybased approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activitybased cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 68. (Hint: Organize all of the company's 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 breakeven point in dollar sales for the Advanced model. \fMolding Department Assemble and Pack Department Total manufacturing overhead assigned Eu Koontz Company manufactures two models of industrial componentsa 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 laborhours. 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 Advanced Total Number of units produced and sold 26,666 16,666 36,666 Sales $3,666,666 $2,666,666 $ 5,666,666 Cost o-F goods sold 2,366,666 1,356,666 3,656,666 Gross margin 766,666 656,666 1,356,666 Selling and administrative expenses 726,666 486,666 1,266,666 Net operating income (loss) $ (29,999) $ 176,666 $ 159,999 ' 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 Assemble and Pack Department would be allocated based on direct laborhours. To enable further analysis, the controller gathered the following information: Assemble Molding and Pack Total Manufacturing overhead costs $ 787,566 $ 562,566 $ 1,356,666 Direct labor hours: Basic 16,666 26,666 36,666 Advanced 5,666 16,666 15,666 Machine hours: Basic 12,666 - 12,666 Advanced 16,666 - 16,666 Required: 1. Using the plantwide approach: a. Calculate the plantwide overhead rate. b, Calculate the amount of overhead that would be assigned to each product. 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. Koontz's production manager has suggested using activitybased costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Manufacturing Activity Cost Pool Activity Measure Overhead Machining Machinehours in Molding $ 417,596 Assemble and pack Direct laborhours in Assemble and Pack 282,506 Order processing Number of customer orders 230,806 Setups Setup hours 346,806 Other (unused capacity) 88,698 $1,356,896
