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Problem #2: Green Lawn Industries produces three types of lawn sprinklers: Oscillating, Rotary, and Traveling. Management...

Problem #2: Green Lawn Industries produces three types of lawn sprinklers: Oscillating, Rotary, and Traveling. Management is going through its annual planning and budgeting process and is anticipating producing 18,500 Oscillating units; 15,000 Rotary units, and 8,400 Traveling units for the upcoming year. Manufacturing costs for the upcoming fiscal year are budgeted to be as follows:

Raw materials cost for Oscillating Sprinklers $ 137,320

Raw materials cost for Rotary Sprinklers $ 183,280

Raw materials cost for Traveling Sprinklers $ 157,280

Direct labor costs Oscillating Sprinklers $ 201,600

Direct labor costs for Rotary Sprinklers $ 230,400

Direct labor costs for Traveling Sprinklers $ 288,000

Production supervisor salary $ 60,000

Production supplies $ 36,000

Rent for production facilities $ 76,000

Floor space used for producing Oscillating Sprinklers 5,000 Square Feet

Floor space used for producing Rotary Sprinklers 7,000 Square Feet

Floor space used for producing Traveling Sprinklers 8,000 Square Feet

Manufacturing overhead costs include the production supervisor salary, production supplies, and rent for the production facilities. It was determined that the most appropriate way to allocate the production supervisor salary and production supplies is on direct labor costs. Rent should be allocated based on the amount of floor space occupied by each of the respective production processes.

Requirements:

a. Determine the total cost and the per unit cost for each of the three products.

b. What sales price should be used for each of the three products if Green Lawn Industries seeks to price its products at cost plus 30 percent.

Expert Solution

a)	Computation of total cost and cost per unit

	Particulars	Oscillating	Rotary	Traveling
	Direct Materials	$ 137,320.00	$ 183,280.00	$ 157,280.00
	Direct Labor	$ 201,600.00	$ 230,400.00	$ 288,000.00
	Manu. OH	$ 45,880.00	$ 57,320.00	$ 68,800.00
	Total Cost	$ 384,800.00	$ 471,000.00	$ 514,080.00
	No. of units	18500	15000	8400
	Cost per unit	$ 20.80	$ 31.40	$ 61.20

b)	Computation of sales price

	Particulars	Oscillating	Rotary	Traveling
	Cost per unit	$ 20.80	$ 31.40	$ 61.20
	Margin (30%)	$ 6.24	$ 9.42	$ 18.36
	Selling price per unit	$ 27.04	$ 40.82	$ 79.56

Workings:

	Total		Total	Cost per
Cost pool	Costs	Drivers	Volume	activity
Production supervisor salary	$ 60,000.00	Direct Labor cost	720000	$ 0.08
Production supplies	$ 36,000.00	Direct Labor cost	720000	$ 0.05
Rent for production facilities	$ 76,000.00	Floor space	20000	$ 3.80

Allocation of OH

Particulars	Oscillating	Workings	Rotary	Workings	Traveling	Workings
Production supervisor salary	$ 16,800.00	($ 201600 x $ 0.08)	$ 19,200.00	($ 230400 x $ 0.08)	$ 24,000.00	($ 288000 x $ 0.08)
Production supplies	$ 10,080.00	($ 201600 x $ 0.05)	$ 11,520.00	($ 230400 x $ 0.05)	$ 14,400.00	($ 288000 x $ 0.05)
Rent for production facilities	$ 19,000.00	(5000 x $ 3.80)	$ 26,600.00	(7000 x $ 3.80)	$ 30,400.00	(8000 x $ 3.80)
Total	$ 45,880.00		$ 57,320.00		$ 68,800.00

ekkarill92 answered 2 years ago

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