Question
In: Accounting
No need to show working. Due Co. manufactures two bicycles, the Mountain Bike and the Street...
No need to show working.
Due Co. manufactures two bicycles, the Mountain Bike and the Street Racer, and anticipates producing 8,000 Mountain Bikes and 4,000 Street Racers.
The direct material cost and direct labor cost for each bike are:
|
|
Direct Materials |
Direct Labor |
|
Mountain Bike |
$120 |
$240 |
|
Street Racer |
$60 |
$160 |
Due’s budgeted overhead cost of $2,140,000 is based on the following:
- Set-up procedures $ 400,000
- Assembling stations $1,200,000
- Finishing $ 240,000
- Shipping $ 300,000
The following activities are needed to manufacture the bikes:
|
Set-up Procedures |
Assembling Stations |
Finishing |
Shipping |
|
|
Mountain Bike |
6,000 |
12,000 |
8,000 |
4,000 |
|
Street Racer |
4,000 |
8,000 |
4,000 |
2,000 |
For Questions 32 – 35, assume Due uses activity-based costing.
- What is the cost driver rate for finishing?
- What is the cost driver rate for shipping?
- What is the manufacturing overhead cost per bike for the Mountain Bike?
- What is the total cost per bike of the Mountain Bike?
Solutions
Expert Solution
Solution 1:
Cost driver rate for Finishing = Total Finishing cost / Total Finishing Activities = $240,000/ (8000+4000)
= $240,000/ 12000 = $20
Solution 2:
Cost driver rate for shipping = Total Shipping cost / Total Shipping Activities = $300,000/ (4000+2000)
= $300,000/ 6000 = $50
Solution 3:
| Cost Pool | Overhead Cost | Total Drivers | Cost driver Rate |
| Setup procedure | $4,00,000 | 10000 | $40.00 |
| Assembly Stations | $12,00,000 | 20000 | $60.00 |
| Finishing | $2,40,000 | 12000 | $20.00 |
| Shipping | $3,00,000 | 6000 | $50.00 |
| Total | $21,40,000 |
| Computation of Overhead allocated and Overhead cost per Mountain Bike | |||
| Mountain Bike | Cost driver Rate | Activities-Mountain Bike | Overhead allocated |
| Setup procedure | $40.00 | 6000 | $2,40,000 |
| Assembly Stations | $60.00 | 12000 | $7,20,000 |
| Finishing | $20.00 | 8000 | $1,60,000 |
| Shipping | $50.00 | 4000 | $2,00,000 |
| Total | $13,20,000 | ||
| Number of Mountain bikes | 8000 | ||
| Overhead cost per bike for the Mountain Bike | $165 | ||
Solution 4:
Total cost per bike of the Mountain Bike = Direct Material + Direct Labor + Overhead per bike = $120 + $240 + $165 = $525
ekkarill92 answered 9 months agoRelated Solutions
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Variable manufacturing and selling expenses
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The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a...
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Bikes
Sales
$
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$
262,000
$
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Variable manufacturing and selling expenses
471,000
118,000
198,000
155,000
Contribution margin
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203,000
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69,300
8,300
40,700
20,300
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20,900
7,900
15,300
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196,000
152,000
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208,000
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40,800
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20,200
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69,600
8,400
41,000
20,200
Depreciation of special
equipment
43,000
20,400
7,400
15,200
Salaries of product-line
managers
113,600...
The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a...
The Regal Cycle Company manufactures three types of bicycles—a
dirt bike, a mountain bike, and a racing bike. Data on sales and
expenses for the past quarter follow:
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Mountain Bikes
Racing
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$
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$
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Variable manufacturing and selling expenses
466,000
111,000
201,000
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156,000
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40,700
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