Question

In: Accounting

Tiger Pride produces two product​ lines: Tminus−shirts and Sweatshirts. Product profitability is analyzed as​ follows: ​T-SHIRTS...

Tiger Pride produces two product​ lines:

Tminus−shirts

and Sweatshirts. Product profitability is analyzed as​ follows:

​T-SHIRTS

SWEATSHIRTS

Production and sales volume

72,000 units

40,000 units

Selling price

$18.00

​$29.00

Direct material

$1.90

​$5.00

Direct labor

$ 4.20$4.20

​$7.20

Manufacturing overhead

$ 4.40$4.40

​$3.00

Gross profit

​$7.50

​$13.80

Selling and administrative

$3.70

​$7.00

Operating profit

$3.80

​$6.80

Tiger​ Pride's managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost​ information:

Activity

Activity cost

Activityminus−cost

driver

Supervision

$118,320

Direct labor hours​ (DLH)

Inspection

$143,250

Inspections

Activities demanded

Tminus−SHIRTS

SWEATSHIRTS

0.75​ DLH/unit

1.2​ DLH/unit

54,000 DLHs

48,000 DLHs

80,000 inspections

15,500 inspections

Under the revised ABC​ system, overhead costs per unit for the Sweatshirts will be​ ________. (Do not round interim calculations. Round the final answer to the nearest​ cent.)

A.

$ 1.97$1.97

per unit

B. $ 1.64 per unit

C. $ 1.10 per unit

D.$ 1.50 per unit

Solutions

Expert Solution

Overhead cost per inspection hour = Total inspection cost/total inspection hours

                                                     = $ 143,250/ (80,000 + 15,500) Hrs

                                                                                = $ 143,250/95,500 = $ 1.5 per Hrs

Overhead inspection cost for sweat shirts (15,500 hours) = $ 1.5 x 15,000 = $ 23,250

Overhead cost per supervision hour = Total supervision cost/total direct labor hours

                                                      = $ 118,320/ (54,000 + 48,000) DLH

                                                     = $ 118,320/102,000 DLH

                                                      = $ 1.16 per DLH

Supervision cost for sweat shirts (48,000 DLH) = $ 1.16 x 48,000 = $ 55,680

Total overhead cost for sweat shirts = $ 23,250 + $ 55,680 = $ 78,930

Overhead cost per unit for sweat shirts = Total overhead cost for sweet shirts/No. of sweat shirts

                                                               = $ 78,930/40,000 = $ 1.97

Hence option “A. $ 1.97” is correct answer

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Titan Pride produces two product lines: T-shirts and Sweatshirts. The company has used a simple costing...
Titan Pride produces two product lines: T-shirts and Sweatshirts. The company has used a simple costing system since its inception. The budgeted factory overhead totals $242,000 and is allocated on the basis of 121,000 direct labor hours (DLHs). Additional production information for the two products is as follows: T-SHIRTS SWEATSHIRTS Production volume 60,000 units 35,000 units DHLs (per unit) 1.2 1.4 Direct costs (per unit) $ 6.50 $ 8.20 The company is currently considering implementing an ABC system to determine...
Shelby Boutique Dress produces two product lines: T-shirts and Sweatshirts. Recent Product Profitability Report prepared by...
Shelby Boutique Dress produces two product lines: T-shirts and Sweatshirts. Recent Product Profitability Report prepared by the accountant follows:                                                                                                       T-SHIRTS                SWEATSHIRTS Production and sales volume units                                                   60,000                      35,000 Selling price                                                                                       $17.00                     $30.00     Direct material                                                                                   $2.50                         $6.20 Direct labor                                                                                         $4.50                         $7.22 Factory overhead                                                                                $2.55                         $4.08 Cost per Unit (cost to make a unit)                                                      $9.55                         $17.50 Gross profit (price minus unit cost)                                                      $7.45                         $12.50 Selling and administrative costs                                                           $4.00                          $7.00       Profit per unit                                                                                         $3.45                         $5.50 Tom, the manager in charge of Sweatshirt operation, has raised concerns about the credibility of the accountant’s Product Profitability Report.   Specifically,...
Oxford Co. produces and sells two lines of t-shirts, Classic and Mod. Oxford provides the following...
Oxford Co. produces and sells two lines of t-shirts, Classic and Mod. Oxford provides the following data. Compute the sales price and the sales volume variances for each product. Budget Actual Unit sales price – Classic …. $15 $16 Unit sales price–Mod ……. $20 $19 Unit sales–Classic ………… 2,400 2,500 Unit sales–Mod ………….. 2,000 1,900
Selma produces t-shirts. From the consumers' perspective, her t-shirts are not different from t-shirts offered by...
Selma produces t-shirts. From the consumers' perspective, her t-shirts are not different from t-shirts offered by other sellers. Selma sells her t-shirts at the going market price of $8 per t-shirt. Her total variable cost is $25 when she produces four t-shirts and $32 when she produces five t-shirts. Her total fixed cost is $20. What is Selma's marginal revenue from selling the fifth t-shirt? Question 36 options: $8 $10.40 $12 $7 ..
A screen-printing business has to choose between printing t-shirts and sweatshirts to manage risk due to...
A screen-printing business has to choose between printing t-shirts and sweatshirts to manage risk due to dwindling student enrollments. The matrix below shows the returns of each shirt and probabilities of three possible enrollment outcomes; high, average, and low. Student Enrollment Outcome Probability Corn Soybeans High 0.1 $25,000 $29,000 Average 0.6 12,000 15,000 Low 0.3 5,000 2,000 Expected Value 11,200 12,500 Minimum Value $5,000 $2,000 Maximum Value $25,000 $29,000 Range $20,000 $27,000 Which shirt type should the business produce considering...
Company Gamma produces and sells plain t-shirts but is considering entering the market of coloured t-shirts....
Company Gamma produces and sells plain t-shirts but is considering entering the market of coloured t-shirts. The plain t-shirts produced by Company Gamma costs $1 per unit and are sold for $5 per unit. If Company Gamma starts producing and selling coloured t-shirts, the cost is expected to be $1.20 per unit and sold for $6 per unit. Required: Show whether it is worth processing the plain t-shirts into coloured t-shirts. Company Gamma has found a more efficient way of...
1. Valentine Clothing operates two product lines: Pants and Shirts. The following information is available for...
1. Valentine Clothing operates two product lines: Pants and Shirts. The following information is available for your analysis of the Pants line: Total Variable expenses = $30,000, contribution margin ratio = 40%, traceable and controllable fixed expenses = $6,000 and segment margin = $5,000. Compute traceable NOT controllable fixed expenses. 2. Remember, Return on Investment (ROI) and Return on Assets (ROA) are equivalent. If ROA = 25%, turnover = 1.25 and income = $6,000, compute Total Sales. 3. Valentine has...
Materials and Labor Variances Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in...
Materials and Labor Variances Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) $2.28 Direct labor (0.75 hr. @ $7.40) 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were...
Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying...
Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: 1 Direct materials (2.2 lbs. @ $0.85) $1.87 2 Direct labor (0.80 hr. @ $7.4) 5.92 3 Standard prime cost $7.79 During the year, 85,750 pounds of material were purchased...
Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying...
Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: 1 Direct materials (2.8 lbs. @ $0.80) $2.24 2 Direct labor (0.75 hr. @ $7.8) 5.85 3 Standard prime cost $8.09 During the year, 79,300 pounds of material were purchased...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT