User Account

All Pages

manufacturing, Accounting Basics

Assignment Help:
Weston Corporation manufactures a product that is available in both a deluxe and a regular model. The company has made the regular model for years; the deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company’s profits have steadily declined. Sales of the deluxe model have been increasing rapidly.
Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year,

Management estimated that $3,080,000 in overhead costs would be incurred and the company would produce and sell 10,000 units of the deluxe model and 50,000 units of the regular model. The deluxe model requires 2.0 hours of direct labor time per unit, and the regular model requires 1.0 hours. Materials and
Labor costs per unit are given below:

Deluxe Regular
Direct materials cost per unit $50.00 $30.00
Direct labor cost per unit $30.00 $15.00

Required

a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. . It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed below:

Activity Cost Pool and Activity Measure Estimated
Overhead cost Activity
Deluxe Regular Total
Purchase orders (number of orders) $ 60,000 500 1,000 1,500
Rework requests (number of requests) 280,000 800 2,000 2,800

Product testing (number of tests) 240,000 7,000 3,000 10,000
Machine-related (machine-hours) 2,500,000 4,500 8,000 12,500
$3,080,000

Required:

b. Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools.

c. Assume that actual activity is as expected for the year. Using activity-based costing, do the following: I. Determine the total amount of overhead that would be applied to each model for the year.
II. Compute the unit product cost for one unit of each model.

d. Can you identify a possible explanation for the company’s declining profits? If so, what is it?


2. Great Company manufactures 60, 000 units of part XL-40 each year for use on its production line. The following are the costs of making part XL-40:
Total Costs Cost per
60, 000 units unit

Direct material Br. 480, 000 Br.8
Direct labor 360, 000 6
Variable factory overhead (FOH) 180, 000 3
Fixed FOH 360, 000 6
Total manufacturing costs Br. 1, 380, 000 Br.23

Another manufacturer has offered to sell the same part to Great for Br.21 each. The fixed overhe ad consists of depreciation, property taxes, insurance, and supervisory salaries. The entire fixed overhead would continue if the Great Company bought the component except that the cost of Br. 120, 000 pertaining to some supervisory and custodial personnel could be avoided.

Instructions:

a) Should the parts be made or bought? Assume that the capacity now used to make parts internally will become idle if the pats are purchased?
b) Assume that the capacity now used to make parts will be either (i) be rented to nearby

manufacturer for Br. 60, 000 for the year or (ii) be used to make another product that will yield a profit contribution of Br. 250,000 per year. Should the company purchase them from the outside supplier?

Related Discussions:- manufacturing

Sales discounts and sales returns, Q. Sales discounts and Sales returns? ...

Q. Sales discounts and Sales returns? Sales discounts arise when the seller tenders the buyer a cash discount of 1 percent to 3 percent to induce early payment of an amount due

Suspence accounts and errors, what are the limitations to errors?

what are the limitations to errors?

Revenues and expenses, Amounts paid on June 30 for a 1-year insurance polic...

Amounts paid on June 30 for a 1-year insurance policy. Is this a pre¬paid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing.

Please use the following information to answer questions, Please use the fo...

Please use the following information to answer questions 4-5: Cash $10,000 Accounts Payable $7,000 Accounts Receivable $6,400 Mortgage Payable $65,000 Supplies $1,500 Long-

Define the product costs, Q. Define the Product costs? Product costs ar...

Q. Define the Product costs? Product costs are costs earns in the acquisition or manufacture of goods. Since you will see in the next section included as product costs for purc

General Journal, Received and paid the telephone bill for $231 including GS...

Received and paid the telephone bill for $231 including GST

CASE ASSIGNMENT, PRICE FOR A 3-6 PAGE PAPER IN APA FORMAT

PRICE FOR A 3-6 PAGE PAPER IN APA FORMAT

Online Exam, test 1

test 1

The following financial data were taken from the annual, Based on the finan...

Based on the financial statements for Jackson Enterprises (income statement, statement of owner's equity, and balance sheet) shown below, prepare the following financial ratios. Al

How accounting helps in internationalisation of businesses, How accounting ...

How accounting helps in Internationalisation of businesses Internationalisation of businesses has created a need for accounting rules to have an international reach. It can no

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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