### Understanding Manufacturing Overhead CostsWhen Jasmine realized how small the margin was for her main product, she was concerned. Having already achieved significant savings in direct materials through supplier partnerships, she was advised to streamline labor usage. The focus then turned to managing overhead costs.#### Key Components of Manufacturing Overhead (MOH) CostsThe total MOH costs for the coming year are projected to be $2,100,000. These costs are driven by three key activities:1. **Cutting** - **Budgeted Cost:** $600,000 - **Budgeted Quantity of Cost Driver:** 60,000 machine hours - **Main Product's Use of Cost Driver:** 8,000 machine hours2. **Fabrication** - **Budgeted Cost:** $1,200,000 - **Budgeted Quantity of Cost Driver:** 120,000 direct labor hours - **Main Product's Use of Cost Driver:** 20,000 direct labor hours3. **Inspection** - **Budgeted Cost:** $300,000 - **Budgeted Quantity of Cost Driver:** 20,000 inspection hours - **Main Product's Use of Cost Driver:** 2,000 inspection hours#### Task (a)To effectively allocate the MOH, it is assumed that the company applies a single plant-wide rate based on direct labor hours:- **Goal:** Calculate this rate and determine the total allocated MOH for the main product.- **Instructions:** Round the plant-wide rate to two decimal places (e.g., 15.25) and the final answer to zero decimal places (e.g., 5,125).**Total Allocated MOH for the Main Product:**- Utilize the provided information and the plant-wide rate to compute the MOH allocation. - Enter the calculated total in the provided space. This structured approach ensures a comprehensive understanding of how MOH impacts product costing and profitability.

Manufacturing overhead is the cost which is incurred on the making of the goods. It includes costs…

When Jasmine realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead. Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each. Activity Cutting Fabrication Inspection Total (a) Budgeted Cost $600,000 1,200,000 300,000 $2,100,000 Budgeted Quantity of Cost Driver 60,000 machine hours 120,000 direct labor hours 20,000 inspection hours Main Product's Use of Cost Driver Total allocated MOH for the main product $ 8,000 20,000 2,000 Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and determine total allocated MOH for the main product. (Round plant-wide rate to 2 decimal places, e.g. 15.25 and final answer to 0 decimal places, e.g. 5,125.)

When Jasmine realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead. Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each. Activity Cutting Fabrication Inspection Total (a) Budgeted Cost $600,000 1,200,000 300,000 $2,100,000 Budgeted Quantity of Cost Driver 60,000 machine hours 120,000 direct labor hours 20,000 inspection hours Main Product's Use of Cost Driver Total allocated MOH for the main product $ 8,000 20,000 2,000 Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and determine total allocated MOH for the main product. (Round plant-wide rate to 2 decimal places, e.g. 15.25 and final answer to 0 decimal places, e.g. 5,125.)

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

Beckett works for Bramble Inc., which produces stuffed animals and dolls in the likeness of customers' pets or loved ones. This way, they can always be together, even when they're apart. To make sure the full cost of making and selling these products is correctly determined, Beckett must carefully assign the support department costs to the operating departments. At the end of the year, these costs are compared to revenues from each segment for profitability analysis. If product categories did not generate as much profit margin as management had hoped, then selling prices and costs are adjusted to manage the margins for next year. Here is the information he has gathered: Total support department costs: HR, $95,200; Legal, $108,640. Total costs in the Animals segment are $652,000, while total costs in the Dolls segment are $519,000. HR provides support to Legal, in addition to the Animals and Dolls segments: 20%, 35%, and 45%, respectively. Legal also provides support to HR and to the…
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 119,000 units of the Sport model and 49,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility Activity Cost Driver Cost Driver Volume Sport Pro Total Assembly building Assembling Machine-hours 7,900 31,900 39,800 Setting up machines Setup hours 59 590 649 Handling material Production runs 27 59 86 Packaging building Inspecting and…
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40…
Katrina Design has decided to experiment with two alternative manufacturing approaches, Identified as MF and LI, for producing men's fashions. The firm expects the total demand to be 28,000 sults. Management estimates the required input resources using the different manufacturing approaches are: Direct Labor (hours) MF LI 108,000 128,000 The cost of direct materials is $13 per yard; the cost of direct labor is $28 per hour. Required: 1. Compute the partial operational productivity ratios for each of the production approaches. 2. Calculate the partial financial productivity ratios for each of the production approaches. 3. Compute the total productivity ratios for each of the production approaches. (For all requirements, round your answers to 4 decimal places.) 1. Direct Materials (yards) 248,000 188,000 2. 2 Direct materials Direct labor Operational partial productivity Direct materials Direct labor 3. Total productivity F2 W S Financial partial productivity #3 E MF D $ 54 F4 R LI F % 5…
"Blast it!" said Amy Wilson, president of a custom furniture design company, Wilson Woodworking. "We've just lost the bid on the Kooper's cabinet by $2,000. It seems we're either too high to get the job or too low to make any money on the jobs we bid. I just don't understand what we are doing wrong!" Wilson Woodworking manufactures cabinets to customers' specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year: Manufacturing overhead Direct labor Jobs require varying amounts of work in the three departments. The Kooper's cabinet job, for example, would have required manufacturing costs in the three departments as follows: Direct materials Direct labor Manufacturing overhead Direct materials. Direct labor Manufacturing overhead Department Fabricating Machining Assembly Total…
Lisa is a contractor, and she owns a small home renovation company that specializes in kitchen renovations. Lisa fears she has been underbidding her projects, and that translates into lost profits that could help sustain her through slow periods. She is putting together an estimate for a potential client and has determined the following activities: Activity Cost Driver Rate Estimated Use for Job Demo of Existing Space Square Footage $3.26 /square foot 520 square feet Cabinet Installation # of Hours $205 /hour 8 hours Countertop Installation Square Footage $12.00/square foot 280 square feet Previously, Lisa was billing at a flat rate of $16 per square foot of the demo space with no additional markup. Lisa would like to add a 20% markup to the cost to arrive at the final bid price. Using Activity-Based Costing (ABC), what is the final bid price for her potential customer? (Round intermediate calculations and final answer to 2 decimal places, eg. 25,000.25.) Final bid price $
Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials Variable manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administrative costs: Variable Fixed (total) Units produced Units sold Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $489 each. During the first month of operations, the following activity was recorded: a. Absorption costing b. Variable costing 4,770 3,550 $ 192 13 $ $438,840 Cost of goods sold: 10% of sales Required: 1. Compute the unit product cost under each of the following costing method. Unit Product Cost $333,900 2. Prepare an…
Hi attached is a problem I am having trouble with. Differenacting income statements from variable costing vs absorption costing. Thank you!
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices.He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required:a) Given the managing director’s concern about DK’s approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W X Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct…
Horton Manufacturing Incorporated produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability. Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow: Month Maintenance Costs Machine Hours $ 2,695 2,740 2,790 2,890 2,925 3,025 2,935 1 2 3 4 56789012 10 11 2,975 2,850 2,640 2,660 2,960 Maintenance cost 1,620 1,730 1,745 1,795 1,790 1,890 1,810 1,845 1,835 1,480 1,690 1,495 Required: 1. Use the high-low method to estimate the fixed and variable portions for maintenance costs. (In your calculations, round "slope (uni variable cost)" to 4 decimal places. Enter the "slope…
Tommy’s Tile Service is planning on purchasing new tile cleaning equipment that will improve their ability to remove tough stains from ceramic tiles. The company’s contribution margin is 25% and its current break-even point is $409,200 in sales revenue. Purchasing the new equipment will increase fixed costs by $9,500. Required: 1. Determine the company’s current fixed costs. 2. Determine the company’s new break-even point in sales. 3. After the purchase of the equipment, how much revenue does the company need to generate a profit of $120,000?
am. 105.