Duradisc corporation produces two types of compact discs

Reference no: EM13577617

DuraDisc Corporation produces two types of compact discs: standard and high-grade. The standard CDs are used primarily in computer drives and are designed for data storage rather than accurate sound reproduction. The company only recently began producing the higher-quality, high-grade model to enter the lucrative musicrecording market. Since the new product was introduced, profits have seen only a modest increase. Management expected a significant profit increase related to rapidly growing sales of the high-grade discs. Management believes the accounting system may not be accurately allocating costs to products. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on the direct labor costs in the products. Last year%u2019s manufacturing overhead was $880,000, based on production of 320,000 standard CDs and 120,000 high-grade CDs. Selling prices last year averaged $3.60 per standard disc and $5.80 per high-grade disc. Direct labor and direct materials costs for last year were as follows:

a. How much of the overhead will be assigned to each product if the three cost drivers are used to allocate overhead? What would be the cost per unit produced for each product?

b. How much of the overhead would have been assigned to each product if direct labor cost had been used to allocate overhead? What would have been the total cost per unit produced for each product?

c. How might the results explain why profits did not increase as much as managementexpected?

Reference no: EM13577617

Questions Cloud

Construct the probabilty distribution for this experiment : an experiment consists of tossing three unfair coins where the probabilty of tossing a head on each is 25. construct

Use exponential smoothing with alpha 2 and the smoothed : q1. given the following data compute the mad for the forecast. nbspnbspnbspnbspnbspnbspnbspnbsp

Prepare entries for allied parts to record the may 5 sale : allied parts was organized on may 1 2013 and made its first purchase of merchandise on may 3. the purchase was for 1400

In random sampling each item or element of the population : in random sampling each item or element of the population has an equal chance of being chosen at each draw. a sample is

Duradisc corporation produces two types of compact discs : duradisc corporation produces two types of compact discs standard and high-grade. the standard cds are used primarily

The may 31 bank statement included a 190 debit memorandum : wright company deposits all cash receipts on the day when they are received and it makes all cash payments by check. at

Sample a 59 30 74 62 87 73 sample b 53 67 85 57 93 79 use a : h1 the mean of sample a is significantly different than the mean of sample b. sample a 59 30 74 62 87 73 sample b 53 67

Based on past experience they believe that they have a 07 : the advertising firm of mcmann and tate has put out bids for two separate contracts. based on past experience they

Kunkel company makes two products and uses a conventional : kunkel company makes two products and uses a conventional costing system in which a single plantwide predetermined

User Account

All Pages