Managerial Accounting 1B Ch17

Managerial Accounting 1B

Financial and Managerial Accounting

Chapter 17

 

Exercise 17-6 Plantwide overhead rate L.O. P1

[The following information applies to the questions displayed below.]

Textra Polymers produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2011 follow.

 

 

   

     

 DLH  

   

     

 MH  

 

      $

   

Molding

Trimming

  Direct labor hours

52,000

 DLH

48,000

  

Machine hours

30,

500

 MH

3,600

  

Overhead cost

s

$

730,000

590,000

 

Data for two special order parts to be manufactured by the company in 2011 follow:

 

 

 

   

 units  

  Machine hours

               

 

 MH    

 MH  

 

 MH    

 MH  

  Direct labor hours          

   

     Molding  

 DLH    

 DLH  

     Trimming  

 DLH    

 DLH  

Part A27C

Part X82B

  

Number of units

9,

800

 units

54,500

   

  Molding

5,100

1,020

   

  Trimming

2,600

650

  

5,500

2,

150

700

3,500

   

 1.
Exercise 17-6 Part 1

Required

1.

Compute the plantwide overhead rate using direct labor hours as the base. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

 

 

  Plantwide overhead rate

rev: 03-04-11

 2.

Exercise 17-6 Part 2

2.

Determine the overhead cost assigned to each product line using the plantwide rate computed in part 1.(Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)

 

 

 

Product

Overhead cost

  Part A27C

  Part X82B

   

3.

Exercise 17-7

Department

al overhead rates L.O. P2

Textra Polymers produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2011 follow.

    Molding Trimming   Direct labor hours     52,000  DLH       48,000  DLH     Machine hours     30,500  MH       3,600  MH  

  

Overhead costs

  $ 730,000       $ 590,000

     

Data for two special order parts to be manufactured by the company in 2011 follow:  

  Part A27C Part X82B   Number of units   9,800  units     54,500  units     Machine hours                      Molding   5,100  MH     1,020  MH        Trimming   2,600  MH     650  MH     Direct labor hours                 

     Molding   5,500  DLH     2,150  DLH        Trimming   700  DLH     3,500  DLH  

 

Required

1.

Compute a departmental overhead rate for the molding department based on machine hours and a department overhead rate for the trimming department based on direct labor hours. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

 

 

Department

Overhead rate

  Molding
  Trimming

 

2.

Determine the total overhead cost assigned to each product line using the departmental overhead rates from requirement 1. (Round your intermediate calculations to 2 decimal places and final answers to whole dollar amount. Omit the “$” sign in your response.)

 

Molding Trimming

  Part A27C         Part X82B      

  Product

Total overhead cost

 

3.

Determine the overhead cost per unit for each product line using the departmental rate.. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product Overhead cost

  Part A27C     Part X82B  

   

4.

Exercise 17-9 Using the plantwide Overhead rate to assess prices L.O. A1, P1

Real Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.

 

  $

 

  

 

   

 

 

   

 

     

Process

Activity

Overhead

Cost

Driver

Quantity

  Components

  Changeover

500,000

Number of batches

800

  Machining

279,000

Machine hours

6,000   

  Setups

225,000

Number of setups

120   

           

$

1,004,000

     

  Finishing

  Welding

  $

180,

300

 

Welding hours

3,000   

 

  Inspecting

   

210,000

 

Number of inspections

700   

 

  Rework

   

75,000

 

Rework orders

300

                     $

465,300

      

  Support

  Purchasing

  $

135,000

 

Purchase orders

450   

 

  Providing space

   

32,000

 

Number of units

5,000   

 

  Providing utilities

   

65,000

  Number of units 5,000   

           

      $

232,000

       

     

   

 

Additional production information concerning its two product lines follows.

 

 

produced

 

    3,500  

  800    

 

 

    400  

  400     300  

  Machine hours  

   

 

  Setups  

    60  

 

   

 

  300    

 

Model 145

Model 212

  Units

1,500

  Welding hours

2,

200

  Batches

400

  Number of inspections

1,800

4,200

60

  Rework orders

160

140

  Purchase orders

150

 

Required

1.

Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line. (Round your intermediate calculations and final answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product Overhead cost

 

 

  Model 145

  Model 212

 

2.

Determine the total cost per unit for each products line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212. (Round your intermediate and final answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product

  Model 145     Model 212  

Total cost

 

3.

Assume if the market price for Model 145 is $800 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. (Input all amounts as positive values. Round your intermediate and final answers to 2 decimal places. Omit the “$” sign in your response.)

 

     

  Model 145       Model 212    

rev: 03-04-11 5.

Exercise 17-13 Using ABC for strategic decisions L.O. P1, P3

Consider the following data for two products of Rowena Manufacturing.

 

 

per unit

Product A

Product B

  Number of units produced

  10,000 units

  2,000 units

  Direct labor cost(@$24 per DLH)

  0.20 DLH per unit

  0.25 DLH per unit

  Direct materials cost

  $ 2 per unit

  $

3

 

Activity

  $

 

    48,000  

   

 

     

    $

 

     

Overhead costs

  Machine setup

121,000

  Materials handling

  Quality control

80,000

249,000

 

Required

1.

Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product A Product B

   

  Manufacturing cost per unit

 

2.

Assume if the market price for Product A is $20 and the market price for Product B is $60, determine the profit or loss per unit for each product. (Round your answers to 2 decimal places. Omit the “$” sign in your response. Input all amounts as positive values.)

 

     

   

   

  Product A

  Product B

 

3.

Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B? (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product A Product B

  Number of setups required for production

  10 setups

  12 setups

  Number of parts required

  1 part / unit

  3 parts / unit

  Inspection hours required

  40 hours

  210 hours

    Product A Product B   Manufacturing cost per unit      

4.1

 Determine the profit or loss per unit for each product. (Round your answers to 2 decimal places. Input all amounts as positive values. Omit the “$” sign in your response.)

          Product A       Product B      

Problem 17-1A Evaluating product line costs and prices using ABC L.O. P3

[The following information applies to the questions displayed below.]

Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about these productsfollow.

 

 

 bottles

 gallons

 pounds

12,500  bottles 180,000  bottles

3

300  setups

  Machine hours

 MH

 MH

PowerPunch   

  

SlimLife   

       

  Production volume

12,500

 bottles

180,000

  Liquid materials

1,400

 gallons

37,000

  Dry materials

620

 pounds

12,000

  Bottles

  Labels

 labels per bottle

1

 label per bottle

  Machine setups

500

 setups

200

3,750

 

Additional data from its two production departments follow.

 

Department Driver Cost

         

  $

 

   

 

  Machine hours    

 

         

  Units   $

 

   

 

  Setups    

 

  Mixing department

        Liquid materials

  Gallons

2,304

        Dry materials

  Pounds

6,941

        Utilities

1,422

  Bottling department

        Bottles

77,000

        Labeling

  Labels per bottle

6,525

        Machine setup

20,000

               

 7.

Problem 17-1A Part 2

2.

What is the cost per bottle for PowerPunch and SlimLife? (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the “$” sign in your response.)

 

 

       

         
PowerPunch    SlimLife   

  Average cost per bottle

 

 9.

 

Problem 17-1A Part 4

4.

What is the minimum price that the company should set per bottle of SlimLife?

 

 

 

 

$0.53 per bottle

$0.86 per bottle

$0.36 per bottle

 

The price of SlimLife must cover the costs associated with the product, so the minimum price for this product is $0.53 / bottle.

 

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