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 M-008 M-123 $109.600%96.000 Totsl $ 205,600 Direct materials Direct labor 57,600 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows: Cost Driver Costs M-006 M-123 Total 139,700 80D 2.000 10.000 Number of production rus Number of inspecions Total overhead 30 40 80,000 20 60 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.) Answer is complete but not entirely correct. -008 M-123 Total 194 0 27.94 63.17 23 17 Total unit b. How much of the overhead will be assigned to each product if direct labor cost is usecd to allocate overhead? What is the total cost per unit produced for each product? (Round "Total unit cost" to 2 decimal places.) Answer is complete but not entirely correct M-1 6 4 3200 $ 100.000 Total unit

Explanation / Answer

overhead rate number of machine hours (139700/10000)= 13.97 per machine hour number of production runs (80000/40)= 2000 per production run number of inspections (95500/60)= 1591.6667 per number of inspections overhead applied M-008 M-123 number of machine hours 111760.00 27940.00 number of production runs 20000.00 60000.00 number of inspections 31833.33 63666.67 total overhead applied 163593.333 151606.667 315200.000 total unit cost M-008 M-123 Direct materials 109,600 96,000 direct labor 109,600 48,000 overhead applied 163,593 151,607 total cost (a) 382,793 295,607 units produced (b) 13,700 2,400 cost per unit c=a/b 27.94 123.17 M-008 M-123 total overhead applied 163,593 151,607 total unit cost 27.94 123.17 b) overhead rate = 315,200/157,600 200.00% overhead assinged M-oo8             = 2* = 109,600*200% 219200 M-123             = 48,000*200% 96000 total unit cost M-008 M-123 Direct materials 109,600 96,000 direct labor 109,600 48,000 overhead applied 219,200 96,000 total cost (a) 438,400 240,000 units produced (b) 13,700 2,400 cost per unit c=a/b 32.00 100 M-008 M-123 total overhead applied 219,200 96,000 total unit cost 32.00 100

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