Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company’s two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $272,000. During that time, the company produced 11,000 units of the M-008 and 2,400 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $ 88,000 $ 96,000 $ 184,000 Direct labor 88,000 48,000 136,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Activity Level Cost Driver Costs M-088 M-123 Total Number of machine-hours $93,500 8,000 2,000 10,000 Number of productions runs 80,000 10 30 40 Number of inspections 98,500 15 35 50 Total overhead $272,000 Required: 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 produced for each product? (round “Total unit cost” to 2 decimal places.) M-008 M-123 Total overhead ________ _______ Total unit cost _________ ________ How much of the 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? M-008 M-123 Total overhead _______ _______ Total unit cost ________ _______
Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company’s two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters.
Manufacturing
M-008 M-123 Total
Direct materials $ 88,000 $ 96,000 $ 184,000
Direct labor 88,000 48,000 136,000
Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows.
Activity Level
Cost Driver Costs M-088 M-123 Total
Number of machine-hours $93,500 8,000 2,000 10,000
Number of productions runs 80,000 10 30 40
Number of inspections 98,500 15 35 50
Total overhead $272,000
Required:
- 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 produced for each product? (round “Total unit cost” to 2 decimal places.)
M-008 M-123
Total overhead ________ _______
Total unit cost _________ ________
- How much of the 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?
M-008 M-123
Total overhead _______ _______
Total unit cost ________ _______
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