Question
In: Accounting
VIP luggage is one of the main product lines for Smith Corporation. Smith uses large molding...
| VIP luggage is one of the main product lines for Smith Corporation. Smith uses large molding machines to press a specially formulated chemical compound into metal molds corresponding to different suitcase sizes and shapes. The molded product is then trimmed, lined with fabric, and fitted with accessories such as locks and hinges before being packed and shipped. The following data pertain to the cost of setting up one of the molding machines and the setup cost for the machine is $80,000 per year. | ||||||||
| Product (Suitcase type) | # of setups per year | Hours per setup | # of units produced | |||||
| 24" Two-suiter | 5 | 8 | 300 | |||||
| 26" Three-suiter | 3 | 10 | 200 | |||||
| 30" Jumbo Wheeler | 2 | 15 | 100 | |||||
| Required: a) Suppose Smith Corporation allocates setup costs to products using the number of setups as the allocation basis. How much setup cost will be allocated to each unit of the three products Smith manufactures? b) Suppose Smith Corporation allocates setup costs using the total number of setup hours as the allocation basis. How much setup cost will be allocated to each unit of the three products? c) Suppose Smith allocates setup costs using the number of units produced. Calculate the setup cost allocated to each unit of the three products. d) Give a condition that would result in the cost allocation per unit in (a) and in (b) would be the same. No calculation required. e) Give a condition that would result in the cost allocation per unit in (a) and in (c) would be the same. No calculation required. |
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Solutions
ekkarill92 answered 2 years agoRelated Solutions
VIP luggage is one of the main product lines for Smith Corporation. Smith uses large molding...
VIP luggage is one of the main product lines for
Smith Corporation. Smith uses large molding machines to press a
specially formulated chemical compound into metal molds
corresponding to different suitcase sizes and shapes. The molded
product is then trimmed, lined with fabric, and fitted with
accessories such as locks and hinges before being packed and
shipped. The following data pertain to the cost of setting up one
of the molding machines and the setup cost for the machine is...
Make or Buy Smith Corporation currently manufactures a subassembly for its main product. The costs per...
Make or Buy
Smith Corporation currently manufactures a subassembly for its
main product. The costs per unit are as follows:
Direct
materials
$ 1
Direct
labor
10
Variable
overhead
5
Fixed
overhead
8
Total
$24
Funkhouser Company has contacted Smith with an offer to sell it
5,000 of the subassemblies for $20 each. If Funkhouser makes the
subassemblies, $5 of the fixed overhead per unit will be allocated
to other products.
Required:
a. Should Smith make or
buy the...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,600 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,500 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,500 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,100, and it can be
sold for $2,500 at this time. Thus, the annual depreciation expense
is $2,100/6 = $350 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,600 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,400, and it can be
sold for $2,600 at this time. Thus, the annual depreciation expense
is $2,400/6 = $400 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new...
The Dauten Toy Corporation uses an injection molding machine
that was purchased prior to the new tax legislation. This machine
is being depreciated on a straight-line basis, and it has 6 years
of remaining life. Its current book value is $2,100, and it can be
sold for $2,500 at this time. Thus, the annual depreciation expense
is $2,100/6 = $350 per year. If the old machine is not replaced, it
can be sold for $500 at the end of its...
The managers of Courtney Cabinets are considering dropping one of their product lines. The product line...
The managers of Courtney Cabinets are considering dropping one
of their product lines. The product line typically has the
following revenue and costs: Sales $120,000 Variable costs 90,000
Contribution margin 30,000 Fixed costs 35,000 Operating loss $
(5,000) If the product line is discontinued, $4,000 of the fixed
costs would be avoided. Also, the freed-up capacity would generate
$6,000 of additional contribution margin from the expansion of
other product lines. If Courtney discontinues the product line, the
effect on overall...
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