Table 1 Selected production and financial data Product Thickness Coated/Uncoated
ID: 2386177 • Letter: T
Question
Table 1Selected production and financial data
Product Thickness Coated/Uncoated Slit Average Rolls per Batch Materials Cost per Roll Selling Price per Roll
A .013 Coated Yes 50 $4,800 $12,600
B .014 Uncoated No 2 $5,200 $13,500
C .015 Coated Yes 35 $5,600 $14,200
D .020 Coated No 175 $7,400 $19,500
Table 2
Overhead
Total Depreciation is $800,000 = Product Change **$8,000 + Slitting $70,000 + Net *$722,000
Total Labor is $300,000 = Product Change ** $3,000 + Slitting $25,000 + Net *$272,000
Total Energy is $500,000 = Product Change **$5,000 + Slitting $80,000 + Net * $415,000
Total Other is $198,470 = Product Change **$1,000 + Slitting $20,000 + Net * $177,470
Total Waste is $ 30,000 = Product Change **$30,000 + Slitting 0+
Net 0*
Net is equal to total amount minus product change cost and minus slitting cost. This amount represents the general
overhead, ie. Overhead that is not specific to a particular product.
**Product change is required of all four products and the cost is to be divided equally among the four products.
Total product cost is equal to materials, overhead, product cost and where incurred slitting costs.
Requirements
1. Prepare a schedule proving that overhead is currently 105% of material costs.
2. Prepare a schedule showing cost per roll of each of the four products using the 105% overhead rate.
3. As Eastvaco’s cost accountant you believe the general overhead should be allocated separately. Prepare a
schedule showing what you believe the new overhead rate should be
Explanation / Answer
Contribution per roll 765.50 -4374.50 1464.78 5233.35
Product uncoated 0.014 is not profitable nad giving a huge loss whereas product 0.020 is most profitable.
Hence management should stop producing product 0.014 and should produce more of product 0.020 also considering the market demand.
ness Coated/uncoated Slit average rolls/ batch ( c) Material cost per roll (a) Selling price per roll (b) Contribution per roll d=(b-a) Total contribution (c*d) 0.013 Yes 50 4800 12600 7800 390000 0.014 No 2 5200 13500 8300 16600 0.015 Yes 35 5600 14200 8600 301000 0.02 No 175 7400 19500 12100 2117500 Total 262 2825100 Total product change = 8000+3000+5000+1000+30000 47000 11750 Total Slitting cost = 70000+25000+80000+20000 195000 Total slits per batch 262 Slit cost per batch 744.27 Other Overhead = 722000+272000+415000+177470 1586470 Total slits per batch 262 Overhead per batch 6055.23 Products 0.013 0.014 0.015 0.02 Total material cost (a*c) 240000 10400 196000 1295000 Less: Product change 11750 11750 11750 11750 Slit cost ( 744.27*50, etc) 37213.74 1488.55 26049.62 130248.09 Other overhead (6055.23*50) 302761.45 12110.46 211933.02 1059665.08 Total cost per batch (e) 591725.19 35749.01 445732.63 2496663.17 Total rolls per batch ( c) 50 2 35 175 Total cost per roll (e/c) 11834.50 17874.50 12735.22 14266.65 Selling price per roll 12600 13500 14200 19500Related Questions
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