Homework Help is Here – Start Your Trial Now!
Business
Accounting
Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happening in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month manufacturing overhead was $183,600. During that time, the company produced 8,160 units of Model SF-08 and 2,040 units of Model SF-48. The direct costs of production were as follows: Direct materials Direct labor SF-08 $ 163,200 122,400 SF-48 $ 91,800 81,600 Total $ 255,000 204,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: Activity Level Cost Driver Direct material costs Number of production runs Number of inspections Total overhead Required: Overhead Costs SF-08 SF-48 Total $ 51,000 55,080 77,520 $183,600 163,200 20 8 91,800 40 11 255,000 60 19 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?

Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happening in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month manufacturing overhead was $183,600. During that time, the company produced 8,160 units of Model SF-08 and 2,040 units of Model SF-48. The direct costs of production were as follows: Direct materials Direct labor SF-08 $ 163,200 122,400 SF-48 $ 91,800 81,600 Total $ 255,000 204,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: Activity Level Cost Driver Direct material costs Number of production runs Number of inspections Total overhead Required: Overhead Costs SF-08 SF-48 Total $ 51,000 55,080 77,520 $183,600 163,200 20 8 91,800 40 11 255,000 60 19 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?

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 12E: Quincy Farms is a producer of items made from farm products that are distributed to supermarkets....
See similar textbooks
icon
Related questions
Question
Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happening in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month manufacturing overhead was $183,600. During that time, the company produced 8,160 units of Model SF-08 and 2,040 units of Model SF-48. The direct costs of production were as follows: Direct materials Direct labor Total SF-08 $ 163,200 122,400 SF-48 $ 91,800 81,600 $ 255,000 204,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: Cost Driver Direct material costs Number of production runs Number of inspections Total overhead Required: Activity Level Overhead Costs $51,000 SF-08 163,200 55,080 77,520 20 8 SF-48 91,800 40 11 Total 255,000 60 19 $ 183,600 ⚫. 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? Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happening in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month manufacturing overhead was $183,600. During that time, the company produced 8,160 units of Model SF-08 and 2,040 units of Model SF-48. The direct costs of production were as follows: Direct materials Direct labor Total SF-08 $ 163,200 122,400 SF-48 $ 91,800 81,600 $ 255,000 204,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: Cost Driver Direct material costs Number of production runs Number of inspections Total overhead Required: Activity Level Overhead Costs $51,000 SF-08 163,200 55,080 77,520 20 8 SF-48 91,800 40 11 Total 255,000 60 19 $ 183,600 ⚫. 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? Complete this question by entering your answers in the tabs below.
Expert Solution
steps

Step by step

Solved in 6 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Pricing Decisions
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS