Question

GenX Corp. makes golf carts and community carts. Golf carts are relatively simple to produce and are made in large quantities. Community carts are customized to individual wholesale customer specifications, mainly due to the uniqueness requested for the community they will be used in. The company produces and sells 600,000 golf carts and 40,000 community carts annually. Revenues and costs incurred for each product are as follows:

	Golf Carts	Comty. Cart
Revenue	40,000,000	24,550,000
DM	5,000,000	3,000,000
DL(25/hr.)	3,400,000	10,000,000
Overhead	?	?

Manufacturing overhead totals $5,360,000 and administrative expenses equal $8,000,000.

a) calculate the profit or (loss) in total and per unit for each product if overhead is assigned to the product using a per unit basis.

b) Calculate the profit or loss in total and per unit for each product if overhead is assigned to products using a direct labor hour basis.

c) Assume that manufacturing overhead can be divided into two cost pools as follows: $1,876,000, which has a cost driver of direct labor hours, and $3,484,000, which has a cost driver of machine hours (totaling 250,000). Golf cart production uses 100,000 machine hours; the community cart production uses 150,000 machine hours. Calculate the profit or loss in total and per unit for each product if overhead is assigned to products using these two overhead bases.

Answer 1