Airborne Industries uses a two-stage allocation method to assign costs to its products. The following information...

Airborne Industries uses a two-stage allocation method to assign costs to its products. The following information has been provided for the month:

	Product X		Product Y		Product Z		Total
Units		3,000		2,000		1,000		6,000
Machine hours		4,000		8,000		8,000		20,000
Direct labor hours		2,000		3,000		5,000		10,000
Direct materials	$	60,000	$	60,000	$	75,000	$	195,000
Direct labor		45,000		80,000		175,000		300,000
Manufacturing overhead
Utilities (machine related)							$	13,000
Supplies (labor related)								8,000
Training (labor related)								20,000
Supervision (labor related)								37,000
Machine depreciation (machine related)								34,000
Lease on factory (machine related)								66,000
Miscellaneous (labor related)								15,000
Total manufacturing overhead							$	193,000

Required:

(a) Allocate the manufacturing overhead to two cost pools: machine-related and labor-related.
(b) Compute the predetermined overhead rate for the two pools, using machine hours and direct labor hours as the bases.
(c) Compute the total costs of production for each of the three products.

Solutions

Expert Solution

(a) Allocation of manufacturing overhead to two cost pools:

Manufacturing overhead	Machine-related	Labor-related
Utilities	$13,000
Supplies		$8,000
Training		$20,000
Supervision		$37,000
Machine depreciation	$34,000
Lease on factory	$66,000
Miscellaneous		$15,000
Total	$113,000	$80,000

(b) Perdetermined overhead rate for machine-related overhead cost = Total machine-related overhead cost / Total machine hours required for all products = $113,000 / 20,000 machine hours = $5.65 per machine hour

Predetermined overhead rate for labor-related overhead cost = Total labor-related overhead cost / Total direct labor hours required for all products = $80,000 / 10,000 direct labor hours = $8 per direct labor hour

(c) Calculation of total cost of production :

	Product X	Product Y	Product Z
Direct marterials cost	$60,000	$60,000	$75,000
Direct labor cost	$45,000	$80,000	$175,000
Manufacturing overhead :
Machine-related overhead [ machine hour * predetermined overhead rate for machine related overheas cost ]	$22,600	$45,200	$45,200
Labor-related overhead [ Direct labor hours * predetermined rate for labor related overhead cost ]	$16,000	$24,000	$40,000
Total cost of production	$143,600	$209,200	$335,200

ekkarill92 answered 1 year ago

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