Edlie Accessories (EA) makes travel bags, both for sale under their own label ("Branded") and for other resellers to put their label on the bags ("Private-Label"). The bags sold through the two channels are similar, but they differ slightly in the quality of materials and detail in the manufacturing process. The manufacturing plant at EA has two departments. Department A-101 was the original manufacturing facility and many of the machines are original. Department A-102 is new, with state-of-the-art equipment. The new equipment facilitates the additional care taken with the Branded product. The following information presents financial results for the two models from last year: Sales revenue Direct material Direct labor Manufacturing overhead Department A-101 Department A-102 Total overhead Private Label $ 778,000 226,000 154,000 Branded $520,000 165,000 105,000 Total $ 1,298,000 391,000 259,000 $ 211,600 254,600 $ 466,200 The product costing system at EA allocates manufacturing overhead on the basis of direct labor costs. Required: a. Compute the profit or loss for each product using plantwide allocation. b. Compute the profit or loss for each product using department allocation. Note: For all requirements, loss amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers rounded to the nearest whole number. a. Using plantwide allocation b. Using department allocation Profit or Loss Private Label Branded
Edlie Accessories (EA) makes travel bags, both for sale under their own label ("Branded") and for other resellers to put their label on the bags ("Private-Label"). The bags sold through the two channels are similar, but they differ slightly in the quality of materials and detail in the manufacturing process. The manufacturing plant at EA has two departments. Department A-101 was the original manufacturing facility and many of the machines are original. Department A-102 is new, with state-of-the-art equipment. The new equipment facilitates the additional care taken with the Branded product. The following information presents financial results for the two models from last year: Sales revenue Direct material Direct labor Manufacturing overhead Department A-101 Department A-102 Total overhead Private Label $ 778,000 226,000 154,000 Branded $520,000 165,000 105,000 Total $ 1,298,000 391,000 259,000 $ 211,600 254,600 $ 466,200 The product costing system at EA allocates manufacturing overhead on the basis of direct labor costs. Required: a. Compute the profit or loss for each product using plantwide allocation. b. Compute the profit or loss for each product using department allocation. Note: For all requirements, loss amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers rounded to the nearest whole number. a. Using plantwide allocation b. Using department allocation Profit or Loss Private Label Branded
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Edlie Accessories (EA) makes travel bags, both for sale under their own label ("Branded") and for other resellers to put their label on
the bags ("Private-Label"). The bags sold through the two channels are similar, but they differ slightly in the quality of materials and
detail in the manufacturing process.
The manufacturing plant at EA has two departments. Department A-101 was the original manufacturing facility and many of the
machines are original. Department A-102 is new, with state-of-the-art equipment. The new equipment facilitates the additional care
taken with the Branded product.
The following information presents financial results for the two models from last year:
Sales revenue
Direct material
Direct labor
Manufacturing overhead
Department A-101
Department A-102
Total overhead
Private Label
$ 778,000
226,000
154,000
Branded
$520,000
165,000
105,000
Total
$ 1,298,000
391,000
259,000
$ 211,600
254,600
$ 466,200
The product costing system at EA allocates manufacturing overhead on the basis of direct labor costs.
Required:
a. Compute the profit or loss for each product using plantwide allocation.
b. Compute the profit or loss for each product using department allocation.
Note: For all requirements, loss amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter
your answers rounded to the nearest whole number.
a. Using plantwide allocation
b. Using department allocation
Profit or Loss
Private Label
Branded
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