Practice: Laughton Corporation makes two styles of cases for compact disks, the standard case and the deluxe case. The company has assigned $210,000 in monthly manufacturing overhead to three cost pools as follows: $90,000 to machining costs, $60,000 to production set-up costs, and $60,000 to inspection costs. Additional monthly data are provided below: Standard Deluxe Case Case Sales revenue $480,000 $189,000 Direct materials $135,000 $45,000 Direct labor $105,000 $30,000 Machine hours 24,000 6,000 Production runs 7 12 Units produced and sold 33,000 3,000 The first and last unit in each production run is inspected for quality control purposes. Inspection costs are allocated to the products based on the number of inspections required. Machining costs are allocated to products using machine hours as an activity base. Set-up costs are allocated to products based on the number of production runs each product line requires. Please show all calculations: Allocate manufacturing overhead from the activity cost pools to each product line. Compare the total per-unit cost of manufacturing standard cases and deluxe cases. On a per-unit basis, which product appears to be more profitable?
Practice:
Laughton Corporation makes two styles of cases for compact disks, the standard case and the deluxe case. The company has assigned $210,000 in monthly manufacturing
Additional monthly data are provided below:
|
|
Standard |
Deluxe |
|
|
Case |
Case |
|
|
|
|
|
Sales revenue |
$480,000 |
$189,000 |
|
Direct materials |
$135,000 |
$45,000 |
|
Direct labor |
$105,000 |
$30,000 |
|
Machine hours |
24,000 |
6,000 |
|
Production runs |
7 |
12 |
|
Units produced and sold |
33,000 |
3,000 |
The first and last unit in each production run is inspected for quality control purposes. Inspection costs are allocated to the products based on the number of inspections required. Machining costs are allocated to products using machine hours as an activity base. Set-up costs are allocated to products based on the number of production runs each product line requires.
Please show all calculations:
- Allocate manufacturing overhead from the activity cost pools to each product line.
- Compare the total per-unit cost of manufacturing standard cases and deluxe cases.
- On a per-unit basis, which product appears to be more profitable?
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