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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 $288,800. During that time, the company produced 11,800 units of the M-008 and 2,500 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $ Direct labor 94,400 $ 100,000 $ 194,400 94,400 50,000 144,400 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Costs Number of machine-hours $ 108,800 Number of production runs 80,000 Number of inspections 100,000 Total overhead $ 288,800 Activity Level M-008 1,000 10 10 M-123 9,000 30 40 Total 10,000 40 50 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

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 $288,800. During that time, the company produced 11,800 units of the M-008 and 2,500 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $ Direct labor 94,400 $ 100,000 $ 194,400 94,400 50,000 144,400 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Costs Number of machine-hours $ 108,800 Number of production runs 80,000 Number of inspections 100,000 Total overhead $ 288,800 Activity Level M-008 1,000 10 10 M-123 9,000 30 40 Total 10,000 40 50 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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $288,800. During that time, the company produced 11,800 units of the M-008 and 2,500 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total 94,400 $ 94,400 Direct materials $ Direct labor Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Costs Number of machine-hours $ 108,800 Number of production runs 80,000 Number of inspections Total overhead 100,000 100,000 $ 194,400 50,000 144,400 $ 288,800 Activity Level M-008 M-123 1,000 10 10 9,000 30 40 Total 10,000 40 50 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
Transcribed Image Text: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 $288,800. During that time, the company produced 11,800 units of the M-008 and 2,500 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total 94,400 $ 94,400 Direct materials $ Direct labor Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Costs Number of machine-hours $ 108,800 Number of production runs 80,000 Number of inspections Total overhead 100,000 100,000 $ 194,400 50,000 144,400 $ 288,800 Activity Level M-008 M-123 1,000 10 10 9,000 30 40 Total 10,000 40 50 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
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