The Messenger Fones Company designs and manufactures cell phones. The company cu
ID: 2723259 • Letter: T
Question
The Messenger Fones Company designs and manufactures cell phones. The company currently offers two models; the T328 and the SS356. The company has three operating departments: design, engineering and production. In the past, the company has been allocating the manufacturing overhead based on machine hours. However, Kayla Rined, the product manager of T328, has a hunch that their current method of using only machine hours as a cost allocation base is resulting in the allocation of too much overhead costs to her product. She has proposed that the company use the ABC system to cost products.
In 2010, the actual manufacturing overhead was $211,000. The following indicates the total amount of machine hours used for the production of each cell phone model in 2010.
Do not enter dollar signs or commas in the input boxes.
a) Calculate the manufacturing overhead cost allocation rate using machine hours.
Round your answers to 2 decimal places.
Manufacturing overhead cost allocation rate: $Answer
b) Determine the manufacturing overhead allocated to each model using the manufacturing overhead cost allocation rate determined in part (a).
Round your answers to the nearest whole number.
T328: $Answer
SS356: $Answer
c) The Messenger Fones Company is considering changing their costing system by tracing manufacturing overhead costs to the three operating activities. The following is the amount of manufacturing overhead costs traceable to the designing, engineering and production activities.
The total cost allocation units used for each product line are:
Determine the manufacturing overhead rate for each activity. In addition, use the manufacturing overhead rates to calculate the allocated overhead for each model.
Round your answers to 2 decimal places.
Round your answers to the nearest whole number.
d) Was Kayla Rined's hunch about the allocation of too much overhead costs to her product right? AnswerNoYes
Round your answers to the nearest whole number.
Under-allocation / Over-allocation: $Answer
Explanation / Answer
Answer a
Total overhead
211000
Total machine hours
4900
Per machine hour rate
43.06
Answer b
T328
SS356
Total
Per machine hour rate
43.06
43.06
Total machine hours
2400
2500
4900
Allocated overhead
1,03,346.94
1,07,653.06
211000
Ansawer C
Design hours
Engineering hours
Machine hours
Unallocatable
Total
Hours
3300
3800
4900
Overhead
73000
51000
61000
26000
211000
Per hour rate
22.12
13.42
12.45
T328
SS356
Design hours
1400
1900
Design per hour rate
22.12
22.12
Total allocation
30,969.70
42,030.30
Engineering hours
1700
2100
Engineering per hour rate
13.42
13.42
Total allocation
22,815.79
28,184.21
Machine hours
2400
2500
Machine per hour rate
12.45
12.45
Total allocation
29,877.55
31,122.45
Total allocation
83,663.04
1,01,336.96
Answer D
T328
SS356
machine hours based
1,03,346.94
1,07,653.06
Activity based
83,663.04
1,01,336.96
Diff
19,683.90
6,316.10
Yes
Answer a
Total overhead
211000
Total machine hours
4900
Per machine hour rate
43.06
Answer b
T328
SS356
Total
Per machine hour rate
43.06
43.06
Total machine hours
2400
2500
4900
Allocated overhead
1,03,346.94
1,07,653.06
211000
Ansawer C
Design hours
Engineering hours
Machine hours
Unallocatable
Total
Hours
3300
3800
4900
Overhead
73000
51000
61000
26000
211000
Per hour rate
22.12
13.42
12.45
T328
SS356
Design hours
1400
1900
Design per hour rate
22.12
22.12
Total allocation
30,969.70
42,030.30
Engineering hours
1700
2100
Engineering per hour rate
13.42
13.42
Total allocation
22,815.79
28,184.21
Machine hours
2400
2500
Machine per hour rate
12.45
12.45
Total allocation
29,877.55
31,122.45
Total allocation
83,663.04
1,01,336.96
Answer D
T328
SS356
machine hours based
1,03,346.94
1,07,653.06
Activity based
83,663.04
1,01,336.96
Diff
19,683.90
6,316.10
Yes
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