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 $295,200. During that time, the company produced 12,700 units of the M-008 and 2,300 units of the M-123. The direct costs of production were as follows: M-008 M-123 Total Direct materials Direct labor $ 101,600 S 92,000 193,600 101,600 46,000 147,600 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 Number of machine-hours Number of production runs Number of inspections Total overhead Costs M-008 M-123 Total $119,200 8,000 2,000 10,000 80,000 96,000 $295,200 20 25 20 30 40 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.) M-008 M-123 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.) M-008 M-123 Total overhead Total unit cost

Explanation / Answer

Total overhead 295,200.00 Cost driver Costs M-008 M-123 No. of Machine Hours 119,200.00      95,360.00      23,840.00 No. of Production runs     80,000.00      40,000.00      40,000.00 No. of Inspections     96,000.00      43,636.36      52,363.64 295,200.00    178,996.36    116,203.64 M-008 M-123 Material 101,600.00      92,000.00 Labour 101,600.00      46,000.00 Overhead 178,996.36    116,203.64 Total Cost 382,196.36    254,203.64 Units     12,700.00        2,300.00 Total Cost per Unit             30.09            110.52 a M-008 M-123 Total Overhead 178,996.36    116,203.64 Total Cost per Unit             30.09            110.52 Total overhead 295,200.00 Cost driver Costs M-008 M-123 Direct Labour Cost 295,200.00    203,200.00      92,000.00 M-008 M-123 Material 101,600.00      92,000.00 Labour 101,600.00      46,000.00 Overhead 203,200.00      92,000.00 Total Cost 406,400.00    230,000.00 Units     12,700.00        2,300.00 Total Cost per Unit             32.00            100.00 b M-008 M-123 Total Overhead 203,200.00      92,000.00 Total Cost per Unit             32.00            100.00

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