MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 10,000 units of M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues and costs: MTI Income Statement M3100 M4 100 M6100 Total Sales revenue. Direct costs Direct materials. $9,000,000 $15,000,000 $13,500,000 $37,500,000 3,000,000 600,000 4,500,000 900,000 3,300,000 10,800,000 1,800,000 Direct labor. Variable overhead Setting up machines..... Processing sales orders... Warehousing.. Operating machines Shipping.... Contribution margin.. Plant administration 3,300,000 2,400,000 1,800,000 2,400,000 1,200,000 900,000 $14,700,000 6,000,000 Gross profit .... $ 8,700,000 MTI's controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following: Activity Cost Driver M3100 M4100 M6100 Setting up machines..... Processing sales orders. Warehousing..... Operating machines Shipping.. Production runs Sales orders received Units held in inventory Machine-hours Units shipped 10 20 20 180 400 220 100 200 100 6,000 9,000 10,000 10,000 17,500 10,000 The employee team recommends that plant administration costs not be allocated to products.
MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 10,000 units of M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues and costs: MTI Income Statement M3100 M4 100 M6100 Total Sales revenue. Direct costs Direct materials. $9,000,000 $15,000,000 $13,500,000 $37,500,000 3,000,000 600,000 4,500,000 900,000 3,300,000 10,800,000 1,800,000 Direct labor. Variable overhead Setting up machines..... Processing sales orders... Warehousing.. Operating machines Shipping.... Contribution margin.. Plant administration 3,300,000 2,400,000 1,800,000 2,400,000 1,200,000 900,000 $14,700,000 6,000,000 Gross profit .... $ 8,700,000 MTI's controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following: Activity Cost Driver M3100 M4100 M6100 Setting up machines..... Processing sales orders. Warehousing..... Operating machines Shipping.. Production runs Sales orders received Units held in inventory Machine-hours Units shipped 10 20 20 180 400 220 100 200 100 6,000 9,000 10,000 10,000 17,500 10,000 The employee team recommends that plant administration costs not be allocated to products.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:3) Using machine-hours to allocate
overhead, how much is the gross
profit?
4) Using activity-based costing
method, how much is the cost driver
rates for setting up machines?
5) Using activity-based costing
method, how much is the cost driver
rates for warehousing?
6) Using activity-based costing
method, how much is the cost driver
rates for shipping?
Transcribed Image Text:MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated
overhead to products using machine-hours. Last year, the company produced 10,000 units of
M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues
and costs:
MTI
Income Statement
M3100
M4 100
M6100
Total
Sales revenue.
Direct costs
Direct materials ..
Direct labor
$9,000,000 $15,000,000 $13,500,000 $37,500,000
3,000,000
600,000
4,500,000
900,000
3,300,000 10,800,000
1,800,000 3,300,000
Variable overhead
Setting up machines.
Processing sales orders...
Warehousing .....
Operating machines
Shipping ..
Contribution margin.
Plant administration
2,400,000
1,800,000
2,400,000
1,200,000
900,000
$14,700,000
Gross profit.....
6,000,000
$ 8,700,000
MTI's controller has heard about activity-based costing and puts together an employee team
to recommend cost allocation bases. The employee team recommends the following:
Activity
Cost Driver
M3100 M4100 M6100
Setting up machines.... Production runs
Processing sales orders
Warehousing...
Operating machines
Shipping..
10
20
20
Sales orders received
Units held in inventory
Machine-hours
180
400
220
100
200
100
6,000
10,000 17,500 10,000
9,000 10,000
Units shipped
The employee team recommends that plant administration costs not be allocated to products.
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