Madison Enterprises manufactures and sells two types of dump trucks, Standard and Economy. The company's production process is organized into two departments, Fabrication and Assembly. For the upcoming year, Madison estimates total direct labor hours (DLHS) of 15,660, total machine hours (MHs) of 12,500, and total manufacturing overhead of $6,264,000. Historically, Madison applied overhead to jobs using a plantwide rate based on DLHs. Madison's production schedule for the upcoming, in terms of units produced, DLHS per unit, and total DLHs for the plant is as follows: Standard Economy Units produced DLH per unit Plantwide DLH 180 102 70 30 Madison plans to switch to departmental rates based on MHs for the Fabrication Department and DLHS for the Assembly Department. Here are estimated overhead data for the upcoming year: Fabrication department Assembly department Total overhead costs $2,739,000 $3,525,000 12,600 3,060 O $22,914 higher using departmental rates O $4,785 higher using departmental rates O$8,127 lower using departmental rates O$15,327 lower using departmental rates Usage of allocation base 30 Economy 70 Standards 4,900 MHS 10,500 DLHs 5,100 MHS 3,600 DLHS Totals 10,000 MHs 14,100 DLHs How much higher or lower will the estimated per-unit manufacturing cost of a Standard truck be if it is computed using departmental overhead rates rather than a plantwide overhead rate?
Madison Enterprises manufactures and sells two types of dump trucks, Standard and Economy. The company's production process is organized into two departments, Fabrication and Assembly. For the upcoming year, Madison estimates total direct labor hours (DLHS) of 15,660, total machine hours (MHs) of 12,500, and total manufacturing overhead of $6,264,000. Historically, Madison applied overhead to jobs using a plantwide rate based on DLHs. Madison's production schedule for the upcoming, in terms of units produced, DLHS per unit, and total DLHs for the plant is as follows: Standard Economy Units produced DLH per unit Plantwide DLH 180 102 70 30 Madison plans to switch to departmental rates based on MHs for the Fabrication Department and DLHS for the Assembly Department. Here are estimated overhead data for the upcoming year: Fabrication department Assembly department Total overhead costs $2,739,000 $3,525,000 12,600 3,060 O $22,914 higher using departmental rates O $4,785 higher using departmental rates O$8,127 lower using departmental rates O$15,327 lower using departmental rates Usage of allocation base 30 Economy 70 Standards 4,900 MHS 10,500 DLHs 5,100 MHS 3,600 DLHS Totals 10,000 MHs 14,100 DLHs How much higher or lower will the estimated per-unit manufacturing cost of a Standard truck be if it is computed using departmental overhead rates rather than a plantwide overhead rate?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Madison Enterprises manufactures and sells two types of dump trucks, Standard and Economy. The
company's production process is organized into two departments, Fabrication and Assembly. For the
upcoming year, Madison estimates total direct labor hours (DLHs) of 15,660, total machine hours
(MHs) of 12,500, and total manufacturing overhead of $6,264,000. Historically, Madison applied
overhead to jobs using a plantwide rate based on DLHS. Madison's production schedule for the
upcoming, in terms of units produced, DLHs per unit, and total DLHS for the plant is as follows:
Standard
Economy
Units produced DLH per unit
180
102
70
30
Madison plans to switch to departmental rates based on MHs for the Fabrication Department and
DLHS for the Assembly Department. Here are estimated overhead data for the upcoming year:
Fabrication department
Assembly department
Total
overhead costs
$2,739,000
$3,525,000
Plantwide DLH
12,600
3,060
O $22,914 higher using departmental rates
$4,785 higher using departmental rates
O $8,127 lower using departmental rates
O $15,327 lower using departmental rates
O None of the above
Usage of allocation base
30 Economy
70 Standards
4,900 MHs
10,500 DLHS
5,100 MHS
3,600 DLHs
Totals
10,000 MHS
14,100 DLHs
How much higher or lower will the estimated per-unit manufacturing cost of a Standard truck be if it
is computed using departmental overhead rates rather than a plantwide overhead rate?
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