Please show me the \'Direct cost\' and \'Desired Profit\'. Jordan Company produc
ID: 2539384 • Letter: P
Question
Please show me the 'Direct cost' and 'Desired Profit'.
Jordan Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow Activities Unit Level 60,000 2,500 labor hrs. Batch Level $17,920 32 setups Facility Level $195,000 13,000 units Product Level Cost Cost driver 11,000 Percentage of use Production of 700 sets of cutting shears, one of the company's 20 products, took 240 labor hours and 7 setups and consumed 13 percent of the product-sustaining activities Required a. Had the company used labor hours as a company wide allocation base, how much overhead would it have allocated to the cutting shears? b. How much overhead is allocated to the cutting shears using activity-based costing? c. Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 700 units are produced. If direct product costs are $190 and the product is priced at 30 percent above cost for what price would the product sell under each allocation system?Explanation / Answer
Ans a Manufacturing overhed rate per hour manufacturing overhead/Direct labor hours (60000+17920+11000+195000)/2500 $113.57 Overhead cost allocated 240*113.57 27257 If we take exact rate 240*113.568 27256 per unit overhead cost 27256/700 38.94 ans b Cutting Cost C Cost driver D Activity rate C/D Activty driver Total cost 60000 2500 24 240 5760 17920 32 560 7 3920 11000 100 110 13 1430 195000 13000 15 700 10500 Overhead cost 21610 No. of units 700 Overhead cost per unit 30.87 ans c ABC Labor Hrs Allocated overhead 30.87 38.94 Direct cost 190 190 Total cost per unit T 220.87 228.94 Desirec Profit (30%*T) 66.26 68.68 Sales Price 287.13 297.62 If any doubt please comment
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