Question

Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and Improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her Intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $306,400. During that time, the company produced 12,900 units of the M-008 and 2,500 units of the M-123. The direct costs of production were as follows. Direct materials Direct labor M-808 $183,200 103, 2e0 M-123 $100, eee 50, eee Total $ 203,280 153,200 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 Costs $129,90€ 80,eee 96,500 $306,400 Activity Level M-008 M-123 8,00 2,eee 20 20 Total 10,000 40 50 20 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 of 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. Required A Required B 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? (Round "Total unit cost" to 2 decimal places.) M-008 M-123 Total overhead Total unit cost Required A Required B >

Answer 1

-Ansunt Page No 0 @ Total cost per unite produced for each product M-008 Machining cosf - $129900 No. of Machine hown = 10,000 Abivily rate - 129900 10.000 . € 12.99 per hown M-008 Machining overhead cost = 8000 X 12.99 = $ 103920 Product cost = $80,000 No. of production suns a 40 Aebivilo vrate = 80.000 + $ 2000 per production 40 Oluns .M-008 Production overhead cost - 2000X20 -$40,000

1 Page No No. of inspections 50 Inspection conf $ 96,500 Acliving site = 96500 = $1930 pen inspection 50 M-008 inspection overhead cosf = 1930 x 20 =$38600 M-008, Total overhead corf = 103920 + 40,000.+ 38600 = $182520 M-103 Machining overhead corf - 2000 * $12.99 .$ 25980 Production overhead cost = $2000 x 20 = $40,000 Inspection overhead coof = $1930* 30 $ 57900 M-123, Total overhead coof - 05980 + 40,000 + 57900 -$123880

Page No ③ M-123 M-008 $103200 $103200 $182520 Direct material cort Direct labour cost Overhead cost Total product cost $100,000 $ 50,000 $123880 LA $388920 $243880 units 12900 units 2500 units . cost per unit $ 3015 | $10955 Total cost per unit produced Rase cach product M-608 ; overhead cost $306 400 X 103 towany 103200 103200+50,000 = 306400 x 103200 153200 = $206400 M-123, Overhead cost = $306400 x 50,000 153200 = $ 100.000

Page No ③ M-008 M-103 $103200 Direct material Direct Labour Overhead cost $ 103200 $206400 $100,000 $ 50,000 $100,000 Tot al cost $ 419800 12900 units unit $250,000 2500 units $100 Cost per unit