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Category > Accounting Posted 07 May 2017 My Price 10.00

Tamarindo Company produces speakers (Model A and Model B)

 

Tamarindo Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor- intensive than Model B’s. Model B is also the more popular of the two speakers. The following data have been gathered for the two products:

 

           Product Data         Model A       Model B

Units produced per year . . . . . . . . . . . . . . . . . . . .                         30,000                      300,000 Prime costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000             $2,000,000

Direct labor hours  . . . . . . . . . . . . . . . . . . . . . . . .                        140,000                      300,000

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . .                         20,000                      200,000

Production runs  . . . . . . . . . . . . . . . . . . . . . . . . . .                         40                             60

Inspection hours . . . . . . . . . . . . . . . . . . . . . . . . . .                              800                         1,200

Maintenance hours . . . . . . . . . . . . . . . . . . . . . . . .                        10,000                       90,000

                                Overhead Costs                                 

 

Setup costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 360,000

Inspection costs  . . . . . . . . . . . . . . . . . . . . . . . .

280,000

Machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

320,000

Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . .

     360,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,320,000

 

Required

1.    Compute the overhead cost per unit for each product using a plantwide rate based on direct labor hours.

2.    Compute the overhead cost per unit for each product using activity-based costing.

3.    Suppose that Tamarindo decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $4.66 per machine hour, and Department 2 (labor intensive) with a rate of $1.20 per direct labor hour. The consumption of these two drivers is given below:


 

 

 

 

 

 

 

Department 1

 

Department 2

Model A

10,000

130,000

 

Model B

170,000

270,000

Compute the overhead cost per unit for each product using departmental rates.

4.    Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. (Did the departmental rates do better than the plantwide rate?)

 

 

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 07 May 2017 09:05 AM My Price 10.00

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Attachments

file 1494147682-1404050_1_636297010383468747_1404050.xlsx preview (696 words )
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