(a) Claire Company produces Tablets and Books. Total overhead costs traditionall
ID: 2418378 • Letter: #
Question
(a)
Claire Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.Activity Pool Department Costs Cost Driver Binding $247,900 Number of units Printing 796,540 Machine hours Product design 196,900 Change orders General 641,800 None Total overhead costs $1,883,140
Other information is as follows:
Tablets Books Units 62,900 20,100 Direct materials cost per unit $3 $10 Direct labor cost per unit $4 $8 Direct labor hours 25,100 16,200 Machine hours 126,000 121,000 Change orders 1,370 2,000
Claire’s managers have gathered the following information about selling and administrative costs.
Activity Pool Total Cost Cost Driver Shipping $300,972 Pounds shipped Advertising 169,500 Number of mailings Commissions 203,575 5% of sales price Total selling and administrative costs $674,047 Tablets Books Weight 31,360 pounds 40,300 pounds Advertising mailings 125,000 101,000 Sales commission 5% of sales price 5% of sales price Selling price per unit $43 $68
Explanation / Answer
Claire Company Overhead Estimate Tablet Book Total Total Overhead estimate 1,883,140 Total Direct labor hrs 25,100.00 16,200.00 41,300 Predetermined Overhead rate per Direct Labor hour $ 45.60 Applied Overhead to each product 1,144,474.92 738,665.08 Selling & Admin Cost Tablet Book Total Weight in lb 31,360.00 40,300.00 71,660.00 Shipping cost allocated on weight 131,712.00 169,260.00 300,972.00 Advertising mail 125,000.00 101,000.00 226,000.00 Advertisisng exp allocated on no of mailing 93,750.00 75,750.00 169,500.00 Sales commission @5% of sales price 135,235.00 68,340.00 203,575.00 Total Selling & Admin cost 360,697.00 313,350.00 674,047.00 Productwise profit Margin Tablet Book Details Per unit Total Amt $ Per unit Total Amt $ Units sold 62,900.00 20,100.00 Sales Revenue 43.00 2,704,700 68.00 1,366,800 Less : Costs of production Direct Material 3.00 188,700.00 10.00 201,000.00 Direct Labor 4.00 251,600.00 8.00 160,800.00 Manufacturing Overhead 1,144,475 738,665 Total cost of Product 1,584,774.92 1,100,465.08 Gross Profit 1,119,925.08 266,334.92 Less: Selling & Admin Cost 360,697.00 313,350.00 Net Margin 759,228.08 (47,015.08) Net Margin per unit $ 12.07 $ (2.34)
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