Landon Company makes two models of children\'s playhouses, the Castle and the Ma
ID: 2351597 • Letter: L
Question
Landon Company makes two models of children's playhouses, the Castle and the Mansion.Basic production information follows:
Castle Mansion
Direct materials cost per unit $ 36 $ 71
Direct labor cost per unit 20 31
Sales price per unit 365 583
Expected production per month 680 units 340 units
Landon has monthly overhead of $181,685, which is divided into the following cost pools:
Setup costs $ 84,000
Quality control 59,985
Maintenance 37,700
Total $ 181,685
The company has also compiled the following information about the chosen cost drivers:
Castle Mansion Total
Number of setups 42 63 105
Number of inspections 350 295 645
Number of machine hours 1,400 1,500 2,900
Requirement 1:
Select the appropriate cost driver for each cost pool and calculate the activity rates if Landon wanted to implement an ABC system. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Setup Costs $ ________
Quality Control $ ________
Maintenance $ ________
Requirement 2:
Assuming an ABC system, assign overhead costs to each product based on activity demands . (Omit the "$" sign in your response.)
Overhead Overhead
Assigned Assigned
To Castle To Mansion
Setup Cost $ _______ $ _______
Quality Control $ _______ $ _______
Maintenance $ _______ $ _______
Total Overhead Cost $ _______ $ _______
Requirement 3:
Calculate the production cost per unit for each of Landon's products in an ABC system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)
Castle Mansion
Unit cost $ ______ $ ______
Requirement 4:
Calculate Landon's gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)
Castle Mansion
Gross margin $ ______ $ ______
Explanation / Answer
Requirement 1: Select the appropriate cost driver for each cost pool and calculate the activity rates if Landon wanted to implement an ABC system. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) setup costs cost drive is number of setups $84,000/105 = $800 per setup quality control cost driver is inspections $59,985/645 inspections = $93 per inspection maintance cost driver is machine hours $37,700/2900 machine hours = $13 per MH Setup Costs $800 per setup Quality Control $93 per inspection Maintenance $13 per MH Requirement 2: Assuming an ABC system, assign overhead costs to each product based on activity demands . (Omit the "$" sign in your response.) Overhead Overhead Assigned Assigned To Castle To Mansion Setup Cost $33,600 $50,400 Quality Control $32,550 $27,435 Maintenance $18,200 $19,500 Total Overhead Cost $84,350 $97,335 (figures: 42*800 = 33600 63*800 = 50400 350*93 = 32550 295*93 = 27435 1400*13 = 18200 1500*13 = 19500) Requirement 3: Calculate the production cost per unit for each of Landon's products in an ABC system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.) castle: 36 + 20 + 84,350/680 = $180.04 mansion: 71 + 31 + 97,335/340 = $388.28 Castle Mansion Unit cost $ 180.04 $ 388.28 Requirement 4: Calculate Landon's gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.) castle: 365 - 180.04 = 184.96 mansion: 583 - 388.28 = 194.72 Castle Mansion Gross margin $ 184.96 $ 194.72
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