Whitman Printing has contracts to complete weekly printing supplements for its customers. For the current year, manufacturing overhead cost estimates total $336,000 for an annual production capacity of 12 million pages.
please answer within the format by providing formula the detailed working
Please provide answer in text (Without image)
Please provide answer in text (Without image)
Please provide answer in text (Without image)
Whitman Printing has contracts to complete weekly printing supplements for its customers. For the current year, manufacturing
Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, Whitman determined that the number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
| Cost pool | Manufacturing overhead costs | Activity level |
| Design changes | $ 60,000 | 200 design changes |
| Setups | 96,000 | 8,000 setups |
| Inspections | 180,000 | 12,000 inspections |
| Total manufacturing overhead costs | $336,000 |
Two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
| Activity | Money Managers | Hospital Systems |
| Pages | 80,000 | 96,000 |
| Design changes | 10 | 0 |
| Setups (one per job) | 50 | 12 |
| Inspections | 40 | 12 |
| Designs (one per job) | 50 | 12 |
Pages are a direct cost at $0.03 per page. Design costs per job average $1,000 for Money Managers and $1,200 for Hospital Systems. Whitman Printing sets prices at $0.10 per page, plus 120% of design costs.
Assume that all costs are variable.
Prepare income statements in contribution margin format for both customers using:
a. Traditional (simple) costing with overhead applied on a page capacity basis.
b. Activity-based costing.
c. How much per page should Whitman Printing charge Money Managers if Whitman wants to break even on this customer? Assume that manufacturing overhead costs and design costs are fixed, and that manufacturing overhead costs are allocated to customers based on pages sold as a percentage of production capacity.
Step by step
Solved in 5 steps
