Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows. Sales revenue Direct labor Direct materials. Baseball Bats Tennis Rackets $1,350,000 250,000 550,000 $900,000 125,000 275,000 Required: a. Compute the profit for each product using plantwide allocation. b. Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. She asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have had a rate of 150 percent of direct labor cost and Department T would have had a rate of 300 percent of direct labor cost. Recompute the profits for each product using each department's allocation rate (based on direct labor cost). a. Using plantwide allocation b. Using department's allocation rate Baseball Bats Profit Tennis Rackets

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department
T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is
the allocation base. The rate used is 200 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows.
Sales revenue
Direct labor
Direct materials
Baseball Bats Tennis Rackets
$1,350,000
250,000
550,000
a.
b.
Required:
a. Compute the profit for each product using plantwide allocation.
b. Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. She asked
her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates
been used, Department B would have had a rate of 150 percent of direct labor cost and Department T would have had a rate of 300
percent of direct labor cost. Recompute the profits for each product using each department's allocation rate (based on direct labor
cost).
$900,000
125,000
275,000
Using plantwide allocation
Using department's allocation rate
Baseball
Bats
Profit
Tennis
Rackets
Transcribed Image Text:Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows. Sales revenue Direct labor Direct materials Baseball Bats Tennis Rackets $1,350,000 250,000 550,000 a. b. Required: a. Compute the profit for each product using plantwide allocation. b. Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. She asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have had a rate of 150 percent of direct labor cost and Department T would have had a rate of 300 percent of direct labor cost. Recompute the profits for each product using each department's allocation rate (based on direct labor cost). $900,000 125,000 275,000 Using plantwide allocation Using department's allocation rate Baseball Bats Profit Tennis Rackets
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