Compute the overhead cost per unit

Assignment Help Finance Basics
Reference no: EM1352602

Vid-saver, Inc., has five activity cost pools and two products (a budget tape rewinder and a deluxe tape rewinder). Information is presented below:

Activity Cost Cost Estimated Cost Driver by Product
Pool Driver Overhead Budget Deluxe

Ordering & Receiving Orders $110,000 600 400
Machine Setup Setup $275,000 500 400
Machining Machine Hours $1,500,000 150,000 100,000
Assembly Parts $1,200,000 1,200,000 800,000
Inspection Inspections $300,000 550 450

Instructions:
Compute the overhead cost per unit for each product. Production is 600,000 units of Budget and 300,000 units of Deluxe. Round your answer to the nearest cent.

Solution Template

Activity Estimated Total EstimatedRate Overhead
Cost Pool Overhead ActvityPer Rate

Ordering & Receiving $110,000 order
Machine Setup $275,000 setup
Machining $1,500,000 machine hr
Assembly $1,200,000 parts
Inspection $300,000 inspections

Total overhead $3,385,000

Activity Cost Budget
Cost
Pool Cost Driver Rate Assigned

Ordering & Receiving $-
Machine Setup $-
Machining $-
Assembly $-
Inspection $-

Total overhead $-
Number of Units
Price per unit #DIV/0!

Actvity Cost Deluxe
Cost
Pool Cost Driver Rate Assigned

Ordering & Receiving $-
Machine Setup $-
Machining $-
Assembly $-
Inspection $-

Total overhead $-
Number of Units
Price per unit #VALUE!

Exercise B Complete the following CVP Exercise 2.5 points

Sam Company makes 2 products, footballs and baseballs. Additional information follows:
Footballs Baseballs
Units 4,000 2,500
Sales $60,000 $25,000
Variable Costs $36,000 $7,000
Fixed Costs $9,000 $9,000
Net Income $15,000 $9,000

Profit per Unit 3.75 3.60

Instructions: If Sam has unlimited demand for both products, which product should Sam tell his sales
people to emphasize?

Solution template:

Contribution Margin per unit:
Footballs
Baseballs

Sam should tell his sales people to sell more due to

Exercise C: Make or buy decision - Incremental Analysis Exercise 2.5 points

Hernandex, Inc., manufactures 3 models of picture frames for a total of 5,000 frames per year.
The unit cost to produce a metal frame follows:

Direct Materials $8.00
Direct Labor $6.00
Variable Overhead $2.00
Fixed Overhead (70% unavoidable) $5.00
Total $21.00

A local company has offered to supply Hernandex the 5,000 metal frames it needs for $16 each.
Instructions: Create an incremental analysis for the make or buy decision.

Solution Template: (Note in dollars, not price per unit)
Incremental cost to buy
Incremental savings:
Direct materials savings
Direct labor savings
Variable overhead savings
Fixed overhead savings - avoidable portion
Incremental savings if 'buy' decision is made $-

Exercise D: Complete the following Pricing Decision Exercise 2.5 Points

Tree Top Company is in the process of setting a selling price for its newest model stunt kite, the
looper. The controller of Tree Top estimates variable cost per unit for the new model to be as
follows:
Direct materials $15.00
Direct labor $13.00
Variable manufacturing overhead $4.00
Variable selling and administrative expenses $5.00
$37.00

In addition, Tree Top anticipates incurring the following fixed cost per unit at a budgeted sales
volume of 20,000 units:
Total Cost Budget Cost
Cost Volume per unit
Fixed manufacturing overhead $240,000 20,000 $12.00
Fixed selling and administrative expenses $260,000 20,000 $13.00
Fixed cost per unit $25.00

Tree Top uses cost-plus pricing and would like to earn a 12% return on its investment (ROI)
of $250,000.

Instructions:
Compute the selling price that would provide Tree Top a 12% ROI.

Solution Template: Unit Price

Variable cost per unit
Fixed cost per unit
Desired ROI per unit
Target Selling price

Desired ROI per unit
( * .12% / 20,000 units = )

 

Reference no: EM1352602

Questions Cloud

Find the intrinsic value of a common stock : Find the intrinsic value of a common stock that last paid a quarterly dividend of $.03 if there is no expected increament in dividends and your required rate of return is 10 percent.
Description of biological and environmental factors : Can someone help me with a description of biological and environmental factors that can influence native and second language acquisition?
Essential elements of performance management systems : Management Questions - Can you discuss with examples, one of the essential elements of performance management systems?
Language development of children : In light of what we have discussed, thus far, in the course (e.g. attention, memory, schemas, etc) , what factors do you the language development of children?
Compute the overhead cost per unit : Vid-saver, Corporation, has five activity cost pools and two products a budget tape rewinder and a deluxe tape rewinder.
Develop the algorithms needed for designer robot : You have been hired as a system designer to develop the algorithms needed for a designer robot that can paint different patterns on the floor based on the commands it receives.
How to from group to a high performance team : From group to a high performance team - Describe how a group can become a high-performance team. Include an examination of the impact of demographic characteristics and cultural diversity on group behavior.
Ethnic diversity and language instruction : If we assume that "dominant" refers to numerical majority, what do you think are the implications for language instruction at the academic level in light of the increasing ethnic diversity in the U.S?
What is its angular velocity after interval : A playground merry-go-round has a radius of 4.60 {rm m} and a moment of inertia of 250 kg m^2 and turns with negligible friction about the vertical axle through its center.

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Mcq question on various finance topics

ABC company has two bonds outstanding which are the same except for maturity date. Bond D matures in four years, while Bond E matures in seven years. If the required return changes by 15 percent

  Present value of annuity calculation

Jean will receive $8,500 per year for the next 15 years from her trust. Explain how you resolved this problem, including which table (for example, present value and future value) was employed and why.

  Explain capital budgeting techniques for supernormal growth

Explain Capital Budgeting Techniques for Supernormal Growth and Dividends are expected to grow at a 25 percent rate for the next 3 years and with growth rate falling off to a constant 8 percent thereafter

  Find the capital gains yield

Calculation of Firms growth Rate and Capital Gains Yield at given dividend options -  Find the Capital Gains Yield?

  Optimal capital structure

The financial manager has estimated the following schedules for the cost of funds: Determine the company optimal capital structure.

  Find expected dividend payout ratio

Calculation of Dividend Payout ratio - If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio?

  Effective and nominal interest rates

You're offered two loan options which you should choose between. Federal Bank offers to charge you 6% compounded annually. State Bank offers to charge you 5.8% compounded monthly. Which of following is true?

  Calculate the price of bond if ytm is given

Valuing Bonds: Syberboard has issued a bond with the following characteristics:

  Objective type questions on leverage analysis

Objective type questions on leverage analysis also the company bases its sensitivity analysis on the expected case scenario

  Find the rate of return on stock

The Frisco Corporation just paid $2.20 as its annual dividend. The dividends have been increasing at a rate of 4% yearly and this trend is expected to continue.

  Value of investment when interest is compounded

If a nurse deposits $1,000 today in the bank account and the interest is compounded annually at 12%, what will be the value of this investment:

  Gordon growth model and one period valuation model

Based on the Gordon Growth Model, compute the anticipated market price of stock that is paying dividends at a constant growth rate of 6.25%, with the recent dividend of $1.00, and the required return rate of 15%.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd