Units produced Machine-hours Direct labor-hours Revenues Direct materials costs Direct labor costs. Manufacturing overhead Operating Profit Silver 2,000 590 600 $ 583,600 310,000 9,600 Gold 1,500 2,100 1,200 $ 793,050 533,250 28,800 Platinum 500 1,050 750 $ 493,350 303,000 25,350 Total 4,000 3,740 2,550 $ 1,870,000 1,146, 250 63,750 561,000 $ 99,000 The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing overhead among the products. The current cost accounting system allocates manufacturing overhead to products based on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better understanding of possible financial implications if demand should be weaker than expected.
Units produced Machine-hours Direct labor-hours Revenues Direct materials costs Direct labor costs. Manufacturing overhead Operating Profit Silver 2,000 590 600 $ 583,600 310,000 9,600 Gold 1,500 2,100 1,200 $ 793,050 533,250 28,800 Platinum 500 1,050 750 $ 493,350 303,000 25,350 Total 4,000 3,740 2,550 $ 1,870,000 1,146, 250 63,750 561,000 $ 99,000 The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing overhead among the products. The current cost accounting system allocates manufacturing overhead to products based on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better understanding of possible financial implications if demand should be weaker than expected.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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pvn.3
Transcribed Image Text:Units produced
Machine-hours
Direct labor-hours
Revenues
Direct materials costs
Direct labor costs
Manufacturing overhead
Operating Profit
Revenue-related overhead
Direct cost-related overhead
Total overhead
Silver
2,000
590
600
$ 583,600
310,000
9,600
Total profit (loss)
Unit profit (loss)
Silver
The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing
overhead among the products. The current cost accounting system allocates manufacturing overhead to products based
on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a
concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better
understanding of possible financial implications if demand should be weaker than expected.
Gold
1,500
2,100
1,200
$ 793,050
533, 250
28,800
The finance team decides that a two-stage system might improve the information available for management. They do an account
analysis and determine that there appear to be two main drivers of overhead: revenue and direct costs. Based on the account analysis,
the team splits the manufacturing overhead into two pools as follows:
$ 176,341
384,659
$ 561,000
Gold
Platinum
500
1,050
750
$493,350
303,000
25,350
Total
4,000
3,740
2,550
d. Compute total and per-unit profits by product line based on the expected (not breakeven) sales by product line using the two-stage
cost allocation system developed by the finance team.
$ 1,870,000
1,146, 250
63,750
561,000
$ 99,000
Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round "Unit profit (loss)"
answers to 2 decimal places. Round your "Total profit (loss)" answers to nearest whole dollar.
Platinum
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