Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $280,000. During that time, the company produced 12,000 units of the M-008 and 2,000 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $100,000 $80,000 $180,000 Direct labor 100,000 40,000 140,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Activity Level M-008 M-123 Total 3,000 8,000 10 20 40 60 Costs $120,000 5,000 70,000 10 90,000 20 $280,000 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 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?

Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $280,000. During that time, the company produced 12,000 units of the M-008 and 2,000 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $100,000 $80,000 $180,000 Direct labor 100,000 40,000 140,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Activity Level M-008 M-123 Total 3,000 8,000 10 20 40 60 Costs $120,000 5,000 70,000 10 90,000 20 $280,000 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 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?

Name: Hanshaben Manufacturing overhead is currently assigned to products bas
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Description: Hanshaben Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturingoverhead was $280,000. During that time, the company produced 12,000 units of the M-008 and 2,000 units of t

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter7: The Master Budget And Flexible Budgeting

Section: Chapter Questions

Problem 12E

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