The cost accounting system at McClellan allocates overhead to products based on direct labor cost. Overhead in year 1, which just ended, was $2,380,000. Data on units sold for year 1 along with the unit sales price and unit direct costs for the two models follow: Starter Model (12,000 units) Pro Model (4,000 units) Sales price per unit $ 310 $ 600 Direct materials per unit 80 150 Direct labor per unit 100 125 Required: Compute product line profits or loss for the Starter model and the Pro model for year 1. A study of overhead shows that without the Starter model, overhead would fall to $1,400,000. Assume all other revenues and costs would remain the same for the Pro model in year 2. Compute product line profits/loss for the Pro model in year 2 assuming the Starter model was not produced or sold.
The cost accounting system at McClellan allocates overhead to products based on direct labor cost. Overhead in year 1, which just ended, was $2,380,000. Data on units sold for year 1 along with the unit sales price and unit direct costs for the two models follow: Starter Model (12,000 units) Pro Model (4,000 units) Sales price per unit $ 310 $ 600 Direct materials per unit 80 150 Direct labor per unit 100 125 Required: Compute product line profits or loss for the Starter model and the Pro model for year 1. A study of overhead shows that without the Starter model, overhead would fall to $1,400,000. Assume all other revenues and costs would remain the same for the Pro model in year 2. Compute product line profits/loss for the Pro model in year 2 assuming the Starter model was not produced or sold.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The cost accounting system at McClellan allocates
| Starter Model (12,000 units) | Pro Model (4,000 units) |
|
|---|---|---|
| Sales price per unit | $ 310 | $ 600 |
| Direct materials per unit | 80 | 150 |
| Direct labor per unit | 100 | 125 |
Required:
-
Compute product line profits or loss for the Starter model and the Pro model for year 1.
-
A study of overhead shows that without the Starter model, overhead would fall to $1,400,000. Assume all other revenues and costs would remain the same for the Pro model in year 2. Compute product line
profits/loss for the Pro model in year 2 assuming the Starter model was not produced or sold.
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