Magle Company manufactures two video game consoies handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product profits have been steadily declining. Management beleves 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 $1440,000 besed on production of 28,000 handheid consoles and 10,000 home consoles. Direct labor and direct materials costs were as follows. one 439,400 44,000 Nandheld total Direct laber $1,10,400 750,000 $1,400, 000 1,43,000 aterials Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows Mivity Lavel andheld Coat beiver Suber of produetion rune Dualiy teste perterned pesoad pao terddres Tetal overtead Costs Assigned total 0,000 194,000 1,000 40 12 100 30 $1.440,000 Required: How much overhead will be assigned to each product if these three cost drivers are used to alocate overhead? What is the total cost per unit produced for each product? How much overhead will be assigned to each product if direct abor cost is used to allocate overhead? What is the total cost per unt produced for each product? Complete this question by entering your answers in the tabs below. Reoured A Required B How much overhead will be assigned to each productt these three cost drivers are used to alocate overhead? What is the total cost per unt produced for each product? (Round Total Cost per Unt to 2 decmal places) Overheed
Magle Company manufactures two video game consoies handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product profits have been steadily declining. Management beleves 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 $1440,000 besed on production of 28,000 handheid consoles and 10,000 home consoles. Direct labor and direct materials costs were as follows. one 439,400 44,000 Nandheld total Direct laber $1,10,400 750,000 $1,400, 000 1,43,000 aterials Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows Mivity Lavel andheld Coat beiver Suber of produetion rune Dualiy teste perterned pesoad pao terddres Tetal overtead Costs Assigned total 0,000 194,000 1,000 40 12 100 30 $1.440,000 Required: How much overhead will be assigned to each product if these three cost drivers are used to alocate overhead? What is the total cost per unit produced for each product? How much overhead will be assigned to each product if direct abor cost is used to allocate overhead? What is the total cost per unt produced for each product? Complete this question by entering your answers in the tabs below. Reoured A Required B How much overhead will be assigned to each productt these three cost drivers are used to alocate overhead? What is the total cost per unt produced for each product? (Round Total Cost per Unt to 2 decmal places) Overheed
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 34P: Kimball Company has developed the following cost formulas:...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
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?
Transcribed Image Text:Magle Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive
than the home consoles. The company only recently began producing the home 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
$1,440,000 based on production of 28,000 handheld consoles and 10,000 home consoles. Direct labor and direct materials costs
were as follows.
Nandheld
Hone
$439,600
604,000
Total
Direct labor
Materials
$1,160,400
750,000
$1,400,000
1,43.000
Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as
follows
Mivity Lavel
andheld
Cost Driver
Nunber of production rune
Quality teste pertorned
thipping orders processed
Costs Assigned
40,000
594,000
Boe
total
50
40
12
100
10
18
30
186,000
50
Total overhead
$1,440,000
Required:
a. How much overhead will be assigned to each product if these three cost drivers are used to alocate overhead? What is the total
cost per unit produced for each product?
b. How much overhead will be assigned to each product if direct iabor cost is used to allocate overhead? What is the total cost per unit
produced for eech product?
Complete this question by entering your answers in the tabs below.
Requred A
Required
How much overhead will be assigned to each product f these three cost drivers are used to alocate overhead? What is the
total cost per unit produced for each product? (Round "Total Cost per Unt to 2 decimal places.)
Overhead
Total Cost
per Unit
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