Hello question is attached, thanks. **Maglie Company Cost Allocation Analysis**Maglie Company manufactures two types of video game consoles: handheld and home. The handheld consoles are smaller and more affordable than the home consoles. The company recently started producing the home model, and since then, profits have been declining. Management suspects that the current accounting system does not accurately allocate costs to products, especially as sales of the new home consoles rise.Management has tasked you with investigating the cost allocation issue. Overhead is currently assigned to products based on their direct labor costs. Data from last year show that manufacturing overhead was $1,440,000 for the production of 28,000 handheld consoles and 10,000 home consoles. Direct labor and materials costs were as follows:| | Handheld | Home | Total ||---------------|---------------|---------------|---------------|| Direct labor | $1,160,400 | $439,600 | $1,600,000 || Materials | $750,000 | $684,000 | $1,434,000 |Management has identified three cost drivers for overhead costs. These drivers and associated costs for last year are detailed below:| Cost Driver | Costs Assigned | Activity Level ||---------------------------|----------------|-----------------------------|| | | Handheld | Home | Total || Number of production runs | $660,000 | 40 | 10 | 50 || Quality tests performed | 594,000 | 12 | 18 | 30 || Shipping orders processed | 186,000 | 100 | 50 | 150 || **Total overhead** | **$1,440,000** | | | |This information will assist in evaluating the discrepancies in cost allocation between the two product lines and help optimize financial strategies for improved profitability. **Cost Allocation Exercise****Objective:**Determine the overhead assigned to each product using different allocation methods and calculate the total cost per unit.**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?**Instructions:**Complete the questions by entering your answers in the tabs below.**Tabs:**- Required A- Required B**Table: Overhead and Total Cost Per Unit**- Two products are listed: Handheld and Home.- Required information: Overhead and Total Cost per Unit for each product.**Guidance:**For the calculations, make sure to round the "Total Cost per Unit" to 2 decimal places as specified.Use the tab navigation to complete each part of the exercise.

Formula: Allocation of overhead = ( Individual activity level / total activity level ) x Total cost…

Maglie 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. Handheld $1,160,400 750,000 Total $1,600,000 1,434,000 Home Direct labor Materials $439,600 684,000 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 Handheld Costs Assigned $ 660,000 594,000 186,000 Cost Driver Home Total Number of production runs Quality tests performed Shipping orders processed 40 12 10 50 30 18 100 50 150 Total overhead $1,440,000

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q