Short Answer Something\'s wrong! Generator X Company produces two generators. Th

Question

Short Answer Something's wrong! Generator X Company produces two generators. The Excel has been manufactured for more than 20 years and it sells for $900. The Power is a new model developed and marketed approximately two years ago. It sells for S1,140. Based on the information in the company's income statement for 20x1, upper management wants to downscale and spend available marketing dollars on the Power while beginning to phase out the production of the Excel. Generator X Company Income Statement For the year ended December 31,20x1 Total S24,360,000 15.732,000 Power Excel S 4,560,000 3.192.000 S19,800,000 Sales Cost of goods sold 12.540,000 S 7,260,000 S 1430,000 22,000 S 1,368,000 978.000 S390,000 Gross Profit $ 8,628,000 Selling and administrative expenses Net Income S1820000 4,000 $97.50 Units Produced and sold Net Income per unit sold S65.00 The standard unit costs of the Power and Excel generators are as follows Power Excel Direct Materials Direct Labor S 584 S 208 42 Power(3.5 hr. X S12 Excel(1.5 hr. X $12 Machine usa 72 Power(4 hr. X S18 Excel(8 hr. X $ 18) Manufacturing overhead* Total Standard cost 144 200 S 570 100 S 798 Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $ 25 per hour

Explanation / Answer

Another method for allocating manufacturing overhead on the basis of direct labour : Cost of Manufacturing Overhead : Power 100*4000 = 400000 Excel 200*22000 = 4400000 4800000 Power Excel Total No of Unit 4000 22000 26000 Direct Labour 3.5 Hr 1.5 Hr No of Hours 14000 33000 47000 Manufacturing Overhead 4800000 per hour mfg ohd 102 Allocation (hrs*rate) 1429787 3370213 4800000 Per unit rate 357 153 511 Recalculation the Cost of these products : Cost of Goods Sold Power Excel Direct Material 584 208 Direct Labour 42 18 Machine usage 72 144 Mfg ohds 357 153 COGS per unit 1055 523 No of Unit 4000 22000 COGS 4221787 11510213 Allocation of Selling and Admin Expenses : No. Of Events Total Traceable Cost Power Cost Excel Cost Power Excel Soldering 385000 1185000 1570000 942000 231000 711000 Shipments 3800 16200 20000 860000 163400 696600 Quality Control 21300 56200 77500 1240000 340800 899200 Purchase Orders 109980 80100 190080 950400 549900 400500 Machine Power 16000 176000 192000 57600 4800 52800 Machine Setups 14000 16000 30000 750000 350000 400000 Other - not traceable (No. Of Units) 4000 22000 26000 2008000 308923 1699077 Total S & D cost 6808000 1948823 4859177 Per Unit 487 221 Recalculation Profit of each of the product : Power Excel Cost per unit Cost per unit Sales 4560000 1140 19800000 900 cost of goods sold 4221787 1055 11510213 523 Gross Profit 338213 85 8289787 377 Selling Admin Cost 1948823 487 4859177 221 Net Income -1610610 -402 3430610 156 Here, it is advisavle to produce Excel product and should research and develop more om power product because it is in loss. Either sale price should be increased or cost of manufacting overheads to be decreased

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.