Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $1,969,500 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Direct materials Direct labor Personal $ 1,441,000 1,025,000 Commercial $ 568,750 616,250 Total $ 2,009,750 1,641,250 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 Number of production runs Quality tests performed Costs Assigned $ 937,500 Personal Commercial Total 50 25 75 800,000 15 25 40 Shipping orders processed 232,000 150 50 200 Total overhead $ 1,969,500 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? 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? Complete this question by entering your answers in the tabs below. Required A Required B How much overhead will be assigned to each product if these three cost drivers are used to a total cost per unit produced for each product? Note: Round "Total Cost per Unit" to 2 decimal places. Personal Commercial Total Cost per Overhead Unit Required A Required B How much overhead will be assigned to each product if direct labor cost is used to allocate of per unit produced for each product? Note: Round "Total Cost per Unit" to 2 decimal places. Personal Commercial Total Cost per Overhead Unit

Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $1,969,500 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Direct materials Direct labor Personal $ 1,441,000 1,025,000 Commercial $ 568,750 616,250 Total $ 2,009,750 1,641,250 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 Number of production runs Quality tests performed Costs Assigned $ 937,500 Personal Commercial Total 50 25 75 800,000 15 25 40 Shipping orders processed 232,000 150 50 200 Total overhead $ 1,969,500 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? 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? Complete this question by entering your answers in the tabs below. Required A Required B How much overhead will be assigned to each product if these three cost drivers are used to a total cost per unit produced for each product? Note: Round "Total Cost per Unit" to 2 decimal places. Personal Commercial Total Cost per Overhead Unit Required A Required B How much overhead will be assigned to each product if direct labor cost is used to allocate of per unit produced for each product? Note: Round "Total Cost per Unit" to 2 decimal places. Personal Commercial Total Cost per Overhead Unit

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 27P: Maxwell Company produces a variety of kitchen appliances, including cooking ranges and dishwashers....

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