roduct-Costing Accuracy, Consumption Ratios Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs: Line Item Description Amount Setting up equipment $ 7,000 Machining 18,000 The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production. Line Item Description Elegant Fina Direct labor $9,000 $3,000 Direct materials $3,000 $3,000 Units 3,000 3,000 Machine hours 500 4,500 Setup hours 100 100 Required: 1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain. 2. Calculate the consumption ratios for each activity. Round your answers to one decimal place. Line Item Description Elegant Fina Machining fill in the blank 2 fill in the blank 3 Setups fill in the blank 4 fill in the blank 5 3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent. (Note: Do not round intermediate calculations.) Line Item Description Overhead cost Elegant $fill in the blank 6 per briefcase Fina $fill in the blank 7 per briefcase 3b. Based on your calculations above which of the following statements is correct? 4. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round your answers to the nearest cent. Line Item Description Overhead cost Elegant $fill in the blank 9 per unit Fina $fill in the blank 10 per unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

roduct-Costing Accuracy, Consumption Ratios

Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs:

Line Item Description	Amount
Setting up equipment	$ 7,000
Machining	18,000

The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production.

Line Item Description	Elegant	Fina
Direct labor	$9,000	$3,000
Direct materials	$3,000	$3,000
Units	3,000	3,000
Machine hours	500	4,500
Setup hours	100	100

Required:

1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain.

2. Calculate the consumption ratios for each activity. Round your answers to one decimal place.

Line Item Description	Elegant	Fina
Machining	fill in the blank 2	fill in the blank 3
Setups	fill in the blank 4	fill in the blank 5

3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent. (Note: Do not round intermediate calculations.)

Line Item Description	Overhead cost
Elegant	$fill in the blank 6 per briefcase
Fina	$fill in the blank 7 per briefcase

3b. Based on your calculations above which of the following statements is correct?

4. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round your answers to the nearest cent.