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: Private Label Branded Total Sales revenue $ 780,000 $ 528,000 $ 1,308,000 Direct material 228,000 166,800 394,800 Direct labor 156,000 106,800 262,800 Manufacturing overhead Department A-101 $ 213,600 Department A-102 259,440 Total overhead $ 473,040 The product costing system at EA allocates manufacturing overhead on the basis of direct labor costs. Required: Compute the profit or loss for each product using plantwide allocation. Compute the profit or loss for each product using department allocation.
Exercise 9-28 (Algo) Plantwide versus Department Allocation (LO 9-2, 3)
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:
| Private Label | Branded | Total | |
|---|---|---|---|
| Sales revenue | $ 780,000 | $ 528,000 | $ 1,308,000 |
| Direct material | 228,000 | 166,800 | 394,800 |
| Direct labor | 156,000 | 106,800 | 262,800 |
| Manufacturing |
|||
| Department A-101 | $ 213,600 | ||
| Department A-102 | 259,440 | ||
| Total overhead | $ 473,040 |
The product costing system at EA allocates manufacturing overhead on the basis of direct labor costs.
Required:
-
Compute the profit or loss for each product using plantwide allocation.
-
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.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
