Question
In: Accounting
Wilmington Office Equipment Corporation manufactures two types of filing cabinets—Deluxe and Executive—and applies manufacturing overhead to...
|
Wilmington Office Equipment Corporation manufactures two types of filing cabinets—Deluxe and Executive—and applies manufacturing overhead to all units at the rate of $148.00 per machine hour. Production information follows. |
| Deluxe | Executive | |||||
| Direct-material cost | $ | 42 | $ | 63 | ||
| Direct-labor cost | 47 | 47 | ||||
| Budgeted volume (units) | 29,600 | 55,500 | ||||
|
The controller, who is studying the use of activity-based costing, has determined that the firm’s overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities’ three respective cost drivers, follow. |
| Deluxe | Executive | Total | |||||||
| Setups | 168 | 128 | 296 | ||||||
| Machine hours | 59,200 | 83,250 | 142,450 | ||||||
| Outgoing shipments | 200 | 150 | 350 | ||||||
|
The firm’s total overhead of $21,082,600 is subdivided as follows: manufacturing setups, $4,599,840; machine processing, $12,649,560; and product shipping, $3,833,200. |
| Required: |
| 1. |
Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using the company’s current overhead costing procedures. |
| 2. |
Compute the unit manufacturing cost of Deluxe and Executive filing cabinets by using activity-based costing. (Round activity based application rates, overhead application and the final answers to 2 decimal places.) |
| 3. |
Is the cost of the Deluxe filing cabinet overstated or understated (i.e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? By how much? (Round your answer to 2 decimal places.) |
| 4. |
Calculate the aggregate amount by which the Deluxe cabinet line is undercosted by the company’s current traditional overhead costing procedures. Calculate the aggregate amount by which the traditional system overcosts the Executive cabinet line. (Round your answers to the nearest whole dollar.) |
| 5. |
Assume that the current selling price of a Deluxe filing cabinet is $443 and the marketing manager is contemplating a $47 discount to stimulate volume. Is this discount advisable? |
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Solutions
ekkarill92 answered 1 year agoRelated Solutions
Wilmington Office Equipment Corporation manufactures two types of filing cabinets—Deluxe and Executive—and applies manufacturing overhead to...
Wilmington Office Equipment Corporation manufactures two types
of filing cabinets—Deluxe and Executive—and applies manufacturing
overhead to all units at the rate of $84.00 per machine hour.
Production information follows.
Deluxe
Executive
Direct-material cost
$
10
$
15
Direct-labor
cost
15
15
Budgeted volume
(units)
16,800
31,500
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and product shipping. Data on the number of...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $136 per machine hour. Production information follows. Type
A Type B Anticipated volume (units) 27,200 51,000 Direct-material
cost per unit $ 36 $ 54 Direct-labor cost per unit 41 41 The
controller, who is studying the use of activity-based costing, has
determined that the firm’s overhead can be identified with three
activities: manufacturing setups, machine processing, and...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $80 per machine hour. Production information follows.
Type A
Type B
Anticipated volume
(units)
8,000
15,000
Direct-material cost per
unit
$
35
$
60
Direct-labor cost per unit
20
20
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $148 per machine hour. Production information follows.
Type A
Type B
Anticipated volume (units)
29,600
55,500
Direct-material cost per unit
$
42
$
63
Direct-labor cost per unit
47
47
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $116 per machine hour. Production information follows.
Type A
Type B
Anticipated volume (units)
23,200
43,500
Direct-material cost per unit
$
26
$
39
Direct-labor cost per unit
31
31
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $80 per machine hour. Production information follows.
Type A
Type B
Anticipated volume (units)
8,000
15,000
Direct-material
cost per unit
$
35
$
60
Direct-labor
cost per unit
20
20
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $124 per machine hour. Production information follows.
Type A
Type B
Anticipated volume
(units)
24,800
46,500
Direct-material cost per
unit
$
30
$
45
Direct-labor cost per unit
35
35
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and...
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead...
Maxey & Sons manufactures two types of storage cabinets—Type
A and Type B—and applies manufacturing overhead to all units at the
rate of $112 per machine hour. Production information follows.
Type A
Type B
Anticipated volume (units)
22,400
42,000
Direct-material cost per unit
$
24
$
36
Direct-labor cost per unit
29
29
The controller, who is studying the use of activity-based
costing, has determined that the firm’s overhead can be identified
with three activities: manufacturing setups, machine processing,
and...
Private Corporation manufactures two types of transponders—no. 156 and no. 157—and applies manufacturing overhead to all...
Private Corporation manufactures two types of transponders—no.
156 and no. 157—and applies manufacturing overhead to all units at
the rate of $77.00 per machine hour. Production information
follows.
No. 156
No. 157
Anticipated volume (units)
6,200
14,500
Direct material cost
$
41
$
66
Direct labor cost
30
26
The controller, who is studying the use of activity-based
costing, has determined that the firm's overhead can be identified
with three activities: manufacturing setups, machine processing,
and product shipping. Data on...
Boxes Ltd manufactures two types of boxes, plastic and cardboard, and currently it applies manufacturing overhead...
Boxes Ltd manufactures two types of boxes, plastic and
cardboard, and currently it applies manufacturing overhead to all
units at the rate of $50 per direct labour hour. Production
information is as follows:
Product Information
Plastic box
Cardboard box
Direct material cost per unit
$20
$10
Direct labour cost per hour
$20
$10
Number of units produced
100,000
200,000
The management accountant Sally suggests that Activity-Based
Costing (ABC) is more appropriate for the firm. She suggests the
firm’s overhead...
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