Question

Gentry Cabinetry produces two models of home shelving, the Basic and the Mega. Data on operations and costs for November are: (10 points)

	Basic	Mega	Total
Machine hours	8,000	4,000	12,000
Direct labor hours	6,000	4,000	10,000
Units produced	1,000	250	1,250
Direct material costs	$20,000	$7,500	$27,500
Direct labor costs	129,000	71,000	200,000
Manufacturing overhead costs			348,200
Total costs			$575,700

1. 
   Required:
   
   Compute the unit cost for each model (Basic & Mega), assuming Gentry Cabinetry uses:
   
   A.) Direct labor hours to allocate overhead costs.
   B.) Direct labor costs to allocate overhead costs.
   C.) Machine hours to allocate overhead costs.

Answer 1

Part A)	Direct labor hours
	Manufacturing Overhead costs	=	348200
	Overhead to be alloacted to basic	=	Manufacturing Overhead costs*Direct labor hours used for Basic/Total direct labor hours
		=	348200*6000/10000
		=	208920
	Overhead to be alloacted to Mega	=	Manufacturing Overhead costs*Direct labor hours used for mega/Total direct labor hours
		=	348200*4000/10000
		=	139280
Part B)	Direct labor Costs
	Manufacturing Overhead costs	=	348200
	Overhead to be alloacted to basic	=	Manufacturing Overhead costs*Direct labor costs of Basic/Total direct labor costs
		=	348200*129000/200000
		=	224589
	Overhead to be alloacted to Mega	=	Manufacturing Overhead costs*Direct labor costs of Mega/Total direct labor costs
		=	348200*71000/200000
		=	123611
Part C)	Machine Hours
	Overhead to be alloacted to basic	=	Manufacturing Overhead costs*Machine hours used for Basic/Total Machine labor hours
		=	(348200*8000)/12000
		=	232133
	Overhead to be alloacted to mega	=	Manufacturing Overhead costs*Machine hours used for Mega/Total Machine labor hours
		=	(348200*4000)/12000
		=	116067