**Educational Content: Cost Allocation in Manufacturing**### Main Street Ice Cream Company OverviewThe Main Street Ice Cream Company employs a plantwide allocation method to distribute overhead costs. This method uses direct labor-hours at a rate of $2 per labor-hour. The company produces the following flavors:- **Strawberry** and **Vanilla** - Manufactured in Department SV.- **Chocolate** - Produced in Department C.**Management:**- **Department SV** is managed by Sven.- **Department C** is managed by Charlene.### Product Costs (Per Thousand Gallons)| | Strawberry | Vanilla | Chocolate ||----------------------|------------|---------|-----------|| Direct labor | $754 | $829 | $1,129 || Raw materials | $804 | $504 | $604 |### Requirements#### a. Calculate Total Cost Using Plantwide Allocation- **Labor Hours Per 1,000 Gallons:** - Strawberry: 55 hours - Vanilla: 65 hours - Chocolate: 150 hoursCompute the total cost of 1,000 gallons for each flavor utilizing plantwide allocation.#### b. Departmental Differences in Overhead AllocationCharlene, managing an older department, requested a breakdown of overhead costs as follows:| | Department SV | Department C ||----------------------|---------------|--------------|| Overhead | $90,864 | $13,104 || Machine-hours | 25,240 | 36,400 || Labor-hours | 25,240 | 18,200 |**Allocation Bases:**- Department SV: Machine-hours- Department C: Labor-hoursCompute the allocation rates based on these parameters.#### c. Determine Cost Using Departmental Allocation RatesAssess the cost of 1,000 gallons for each flavor using departmental allocation rates (from requirement b). The machine-hours needed per 1,000 gallons are: - Strawberry: 55 hours- Vanilla: 65 hours- Chocolate: 154 hoursContinue using the same direct labor-hours as in requirement (a).### Explanation of Overhead Allocation Concepts**Overhead Allocation:** A method to distribute indirect costs to different departments or products. Here, machine-hours and labor-hours serve as bases for distributing these costs.**Plantwide Rate:** A single overhead rate applied across all products and departments

Production cost is the total cost incurred for producing a product .It includes direct…

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $2 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow. Direct labor (per 1,000 gallons) Raw materials (per 1,000 gallons) Strawberry $754 804 Vanilla $ 829 504 Chocolate $1,129 604

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $2 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow. Direct labor (per 1,000 gallons) Raw materials (per 1,000 gallons) Strawberry $754 804 Vanilla $ 829 504 Chocolate $1,129 604

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Direct Labor wage rate is $ 30 per hour. a) Compute total cost per unit (for lambda and gamma) using traditional plantwide approach. (round your numbers) b) Compute total cost per unit (for lambda and gamma) using activity-based approach. (round your numbers)
Adirondack Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. Painting Dept. Finishing Dept. Totals Overhead $254,100 80,200 $334,300 Ob. $2.07 per dlh Oc. $7.71 per dlh Od. $24.20 per dlh Total Direct Labor Hours 10,500 10,400 20,900 DLH per Product A 9 6 15 B 10 The single plantwide factory overhead rate for Adirondack Marketing Inc. is Oa. $16.00 per dlh 6 16
Adirondack Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. Total DLH per Product Direct Overhead Labor Hours B Painting Dept. $248,400 10,300 Finishing Dept. 65,700 10,000 6 Totals $314,100 20,300 11 12 The single plantwide factory overhead rate for Adirondack Marketing Inc. is Oa. $6.57 per dlh Ob. $15.47 per dlh Oc. $2.09 per dlh Od. $24.12 per dlh
Gail Cleaners produces a commercial cleaning compound known as Carpex. The direct materials and direct labour standards for one unit of Carpex follow: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 4.10 kilograms $ 2.20 per kilogram $ 9.02 Direct labour 0.42 hour $ 8.00 per hour a 3.36 Variable overhead 0.42 hour $ 1.30 per hour 0.55 The budgeted fixed overhead cost is $14, 619 per month. The denominator activity level of the allocation base is 1,596 direct labour - hours. During the most recent month, the following activity was recorded: a. 9, 100 kilograms of material were purchased at a cost of $2.22 per kilogram. b. All of the material purchased was used to produce 3,800 units of Zoom. c. A total of 790 hours of direct labour time was recorded at a total labour cost of 9,243. d. The variable overhead cost was $1,580, and the fixed overhead cost was $31, 713.
Lovell Variety Seeds mass produces wildflower seed packs. Relevant information used for the process costing system is provided below: Beginning physical units 2,300 Physical units started 22,600 Units in ending WIP 9,500, 40% complete Beginning costs $3,100 Added direct materials costs $12,000 Added direct labor costs $19,500 Added manufacturing overhead costs $8,600 What is the costs completed and transferred out? Please round your answer to the nearest whole dollar.
Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory o following table presents information about estimated overhead and direct labor hours. Overhead $258,300 65,600 $323,900 Direct Labor Hours (dih) 8 Painting Dept. 8 dih Finishing Dept. 7 Totals 15 dih Using a single plantwide rate, the factory overhead allocated per unit of Product B is Oa. $107.63 Ob. $240.45 Oc. $144.27 Od. $16.03 9,600 dih Product 10,600 20,200 dih A S 9 dih
Factory depreciation Indirect labor Factory electricity Indirect materials Selling expenses Administrative expenses Total costs Tortilla chips Potato chips Factory overhead is allocated to the three products on the basis of processing hours. The products had the following production budget and processing hours per case: Budgeted Volume Processing Hours (Cases) Per Case Pretzels Total Tortilla chips Potato chips $24,012 59,508 6,000 6,000 1,200 13,200 Pretzels 6,786 14,094 33,408 18,792 $156,600 Total If required, round all per-case answers to the nearest cent. a. Determine the single plantwide factory overhead rate. per processing hour 0.12 0.15 b. Use the overhead rate in (a) to determine the amount of total and per-case overhead allocated to each of the three products under generally accepted accounting principles. Total Per-Case Factory Overhead Factory Overhead 0.10
Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $220,000 typically perform both tasks; other firm-wide overhead is expected to total $80,000. These costs are allocated as follows: Bouquet Production Delivery Other Wages and salaries 70 % 20 % 10 % Other overhead 50 % 30 % 20 % Skyline anticipates making 20,000 bouquets and 5,000 deliveries in the upcoming year.What is the cost of wages and salaries and other overhead that would be charged to each bouquet made?
A Midwest producer of specialty farming equipment, Agriboon, has three products that the company needs costing information about. The following information is available for each product. XY263 GO987 TR345 Direct material cost per unit $2.00 $8.00 $10.00 Direct labor cost per hour $15.00 $16.75 $18.00 Agriboon presently applies overhead using a predetermined rate based on direct labor hours. Estimated Direct Labor hours for the year are 132,026. The product leader for GO987 has suggested that Agriboon switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for the year: Activity Recommended Cost Driver Estimated Cost Estimated Cost Driver Units Materials Handling Requisition Request $38,912 1,216 Request Machine Operations Machine Hours $142,500 12,000 Hours Safety Compliance Compliance Test $125,000 1,100 Test Total OH…
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows. Sales revenue Direct labor Direct materials Baseball Bats $1,540,000 260,000 556,000 Tennis Rackets a. Using plantwide allocation b. Using department's allocation rate $1,025,000 130,000 289,000 Required: a. Compute the profit for each product using plantwide allocation. b. Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. She asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have had a rate of 150 percent of…
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department Y produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 100 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows. Baseball Bats Tennis Rackets Sales revenue $1,550,000 $1,000,000 Direct labor 360,000 100,000 Direct materials 558,000 290,000 Required: Compute the profit for each product using plantwide allocation. Maria, the manager of Department T, was convinced that…
Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:Indirect labor $507,000Cutting Department 156,000Finishing Department192,000 ________Total $855,000 _______ The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:Activity Budgeted Activity Cost Activity BaseProduction control $237,000 Number of production runsMaterials handling 270,000 Number of moves ________Total $507,000 ________ ________The activity-base usage quantities and units produced for the two products follow:Instructions1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is…