In: Accounting
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:
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.
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