Managerial Accounting 1B Ch17

Managerial Accounting 1B

Financial and Managerial Accounting

Chapter 17

 

Exercise 17-6 Plantwide overhead rate L.O. P1

[The following information applies to the questions displayed below.]

Textra Polymers produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2011 follow.

 

 

Molding

Trimming

  Direct labor hours

 

 

52,000

 DLH

 

 

 

48,000

 DLH

 

  Machine hours

 

 

30,500

 MH

 

 

 

3,600

 MH

 

  Overhead costs

 

$

730,000

 

 

 

$

590,000

 

 


 

Data for two special order parts to be manufactured by the company in 2011 follow:

 

 

Part A27C

Part X82B

  Number of units

 

9,800

 units

 

 

54,500

 units

 

  Machine hours

 

 

 

 

 

 

 

 

     Molding

 

5,100

 MH

 

 

1,020

 MH

 

     Trimming

 

2,600

 MH

 

 

650

 MH

 

  Direct labor hours

 

 

 

 

 

  

 

 

     Molding

 

5,500

 DLH

   

2,150

 DLH

 

     Trimming

 

700

 DLH

   

3,500

 DLH

 

 

 

 1.Exercise 17-6 Part 1

Required

1.

Compute the plantwide overhead rate using direct labor hours as the base. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

 

  Plantwide overhead rate

 

rev: 03-04-11


 2.

Exercise 17-6 Part 2

2.

Determine the overhead cost assigned to each product line using the plantwide rate computed in part 1.(Round your intermediate calculations to 2 decimal places. Omit the "$" sign in your response.)

 

Product

Overhead cost

  Part A27C

 

  Part X82B

 


 

 

3.

Exercise 17-7 Departmental overhead rates L.O. P2

Textra Polymers produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2011 follow.

 

 

Molding

Trimming

  Direct labor hours

 

 

52,000

 DLH

 

 

 

48,000

 DLH

 

  Machine hours

 

 

30,500

 MH

 

 

 

3,600

 MH

 

  Overhead costs

 

$

730,000

 

 

 

$

590,000

 

 


 

Data for two special order parts to be manufactured by the company in 2011 follow:

 

 

Part A27C

Part X82B

  Number of units

 

9,800

 units

 

 

54,500

 units

 

  Machine hours

 

 

 

 

 

 

 

 

     Molding

 

5,100

 MH

 

 

1,020

 MH

 

     Trimming

 

2,600

 MH

 

 

650

 MH

 

  Direct labor hours

 

 

 

 

 

  

 

 

     Molding

 

5,500

 DLH

 

 

2,150

 DLH

 

     Trimming

 

700

 DLH

 

 

3,500

 DLH

 


 

Required

1.

Compute a departmental overhead rate for the molding department based on machine hours and a department overhead rate for the trimming department based on direct labor hours. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

 

Department

Overhead rate

  Molding

 

  Trimming

 


 

2.

Determine the total overhead cost assigned to each product line using the departmental overhead rates from requirement 1. (Round your intermediate calculations to 2 decimal places and final answers to whole dollar amount. Omit the "$" sign in your response.)

 

  Product

Molding

Trimming

Total overhead
cost

  Part A27C

 

 

 

  Part X82B

 

 

 


 

3.

Determine the overhead cost per unit for each product line using the departmental rate.. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

 

  Product

Overhead cost

  Part A27C

 

  Part X82B

 


 

 

4.

Exercise 17-9 Using the plantwide Overhead rate to assess prices L.O. A1, P1

Real Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.

 

Process

Activity

Overhead Cost

Driver

Quantity

  Components

  Changeover

 

$

500,000

 

Number of batches

800   

 

  Machining

 

 

279,000

 

Machine hours

6,000   

 

  Setups

 

 

225,000

 

Number of setups

120   

 

 

 



 

 

 

 

 

 

$

1,004,000

 

 

 

  Finishing

  Welding

 

$

180,300

 

Welding hours

3,000   

 

  Inspecting

 

 

210,000

 

Number of inspections

700   

 

  Rework

 

 

75,000

 

Rework orders

300   

 

 

 



 

 

 

 

 

 

$

465,300

 

  

 

  Support

  Purchasing

 

$

135,000

 

Purchase orders

450   

 

  Providing space

 

 

32,000

 

Number of units

5,000   

 

  Providing utilities

 

 

65,000

 

Number of units

5,000   

 

 

 



 

 

 

 

 

 

$

232,000

 

 

 

 

 

 





 

 

 


 

Additional production information concerning its two product lines follows.

 

 

Model 145

Model 212

  Units produced

 

1,500

 

 

3,500

 

  Welding hours

 

800

 

 

2,200

 

  Batches

 

400

 

 

400

 

  Number of inspections

 

400

 

 

300

 

  Machine hours

 

1,800

 

 

4,200

 

  Setups

 

60

 

 

60

 

  Rework orders

 

160

 

 

140

 

  Purchase orders

 

300

 

 

150

 


 

Required

1.

Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)

 

  Product

Overhead cost

  Model 145

 

  Model 212

 


 

2.

Determine the total cost per unit for each products line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212. (Round your intermediate and final answers to 2 decimal places. Omit the "$" sign in your response.)

 

  Product

Total cost

  Model 145

 

  Model 212

 


 

3.

Assume if the market price for Model 145 is $800 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. (Input all amounts as positive values. Round your intermediate and final answers to 2 decimal places. Omit the "$" sign in your response.)

 

 

 

 

  Model 145

 

 

  Model 212

 

 


rev: 03-04-11

5.

Exercise 17-13 Using ABC for strategic decisions L.O. P1, P3

Consider the following data for two products of Rowena Manufacturing.

 

 

Product A

Product B

  Number of units produced

  10,000 units

  2,000 units

  Direct labor cost(@$24 per DLH)

  0.20 DLH per unit

  0.25 DLH per unit

  Direct materials cost

  $ 2 per unit

  $ 3 per unit


 

Activity

Overhead costs

  Machine setup

 

$

121,000

 

  Materials handling

 

 

48,000

 

  Quality control

 

 

80,000

 

 

 



 

 

 

$

249,000

 

 

 





 


 

Required

1.

Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

 

 

Product A

Product B

  Manufacturing cost per unit

 

 


 

2.

Assume if the market price for Product A is $20 and the market price for Product B is $60, determine the profit or loss per unit for each product. (Round your answers to 2 decimal places. Omit the "$" sign in your response. Input all amounts as positive values.)

 

 

 

 

  Product A

 

 

  Product B

 

 


 

3.

Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

 

 

Product A

Product B

  Number of setups required for production

  10 setups

  12 setups

  Number of parts required

  1 part / unit

  3 parts / unit

  Inspection hours required

  40 hours

  210 hours


 

 

Product A

Product B

  Manufacturing cost per unit

 

 


 

4.1

 Determine the profit or loss per unit for each product. (Round your answers to 2 decimal places. Input all amounts as positive values. Omit the "$" sign in your response.)

 

 

 

 

  Product A

 

 

  Product B

 

 


 

Problem 17-1A Evaluating product line costs and prices using ABC L.O. P3

[The following information applies to the questions displayed below.]

Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about these productsfollow.

 

 

PowerPunch     

SlimLife          

  Production volume

12,500

 bottles

180,000

 bottles

  Liquid materials

1,400

 gallons

37,000

 gallons

  Dry materials

620

 pounds

12,000

 pounds

  Bottles

12,500

 bottles

180,000

 bottles

  Labels

3

 labels per bottle

1

 label per bottle

  Machine setups

500

 setups

300

 setups

  Machine hours

200

 MH

3,750

 MH


 

Additional data from its two production departments follow.

 

Department

Driver

Cost

  Mixing department

 

 

 

 

 

        Liquid materials

  Gallons

 

$

2,304

 

        Dry materials

  Pounds

 

 

6,941

 

        Utilities

  Machine hours

 

 

1,422

 

  Bottling department

 

 

 

 

 

        Bottles

  Units

 

$

77,000

 

        Labeling

  Labels per bottle

 

 

6,525

 

        Machine setup

  Setups

 

 

20,000

 


 

 

 

 

 

 

 

 

 7.

Problem 17-1A Part 2

2.

What is the cost per bottle for PowerPunch and SlimLife? (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the "$" sign in your response.)

 

 

PowerPunch   

SlimLife   

  Average cost per bottle

 

 

 

 


         



 

 9.

 

Problem 17-1A Part 4

4.

What is the minimum price that the company should set per bottle of SlimLife?

 

 

$0.53 per bottle

 

$0.86 per bottle

 

$0.36 per bottle

 

The price of SlimLife must cover the costs associated with the product, so the minimum price for this product is $0.53 / bottle.

 

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