Doaktown Products manufactures fishing equipment for recreational uses. The Mira

Question

Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $315,200. During that time, the company produced 13,700 units of the M-008 and 2,400 units of the M-123. The direct costs of production were as follows Total Drect materials Direct labor $ 109.600 96000 $ 205.600 109,600 48000 157,600 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows: Level Cost Driver Costs M-008 M-123 Total Number of production runs Number of inspections Total overhead 139,700 8000 2,000 10ODD 40 60 80,000 95.500 10 20 30 40 5 315.200 Required a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? Round your intermediate calculations and final answers to 2 decimal places.) Total overhead Total unit cost b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Round Total unit cost" to 2 decimal places.) Total overhead Total unt cost

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars M-008 M-123 Direct Materials M008 = 109600/13700 M123 = 96000/2400                    8.00                        40.00 Direct Labour M008 = 109600/13700 M123 = 48000/2400                    8.00                        20.00 a) Statement showing computations Particulars Amount a Activity Driver No of Activity b Cost per activity c= a/b No of Activity of M008 d Cost Allocated to M008 c*d No of Activity of M123 e Cost Allocated to M123 c*e Number of machine hours       139,700.00 MH           10,000.00                     13.97            8,000.00              111,760.00         2,000.00       27,940.00 No of production runs         80,000.00 Production run                    40.00               2,000.00                  10.00                20,000.00               30.00       60,000.00 No of inspections         95,500.00 Inspection                    60.00               1,591.67                  20.00                31,833.33               40.00       63,666.67 Total Overhead       315,200.00              163,593.33     151,606.67 No of units                13,700.00         2,400.00 Overhead Cost per unit                        11.94               63.17 M008 M123 Total Overhead       163,593.33             151,606.67 M008 M123 Direct Materials per unit                    8.00                        40.00 Direct Labour per unit                    8.00                        20.00 Overhead Cost per unit                 11.94                        63.17 Total cost per unit                 27.94                      123.17 b) M008 M123 Total Overhead M008 = 109600/157600 *315200 M123 = 48000/157600 *315200       219,200.00                96,000.00 M008 M123 Direct Materials per unit                    8.00                        40.00 Direct Labour per unit                    8.00                        20.00 Overhead Cost per unit                 16.00                        40.00 Total cost per unit                 32.00                      100.00

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