Smokey and the Bandit produces outdoor activity clothing. The product line consists of pants, jackets, tops,...

Smokey and the Bandit produces outdoor activity clothing. The product line consists of pants, jackets, tops, and accessories. Data has been collected related to direct materials and direct labor for the four product lines. Smokey and the Bandit has also collected information on four possible cost drivers (units, batches, machine hours, labor hours). All this information is listed below. Construct a spreadsheet that will allocate overhead for each of these alternative drivers and will calculate the total per unit cost for each product line. Use the VLOOKUP function (show them) when constructing the spreadsheet so that you can determine the effect of different cost drivers on the overhead allocated and the resulting cost per unit.

Product Line	Units		Average Sales Price per unit	Total Material Cost	Total Labor Cost
Pants		4,600	$73	$234,600	$20,115
Jackets		2,500	$98	$145,000	$25,200
Tops		9,800	$36	$156,800	$32,970
Accessories		18,500	$12	$ 37,000	$15,210

Product Line	Batches		Machine Hours		Labor Hours
Pants		42		1,640	1,341
Jackets		26		1,730	1,400
Tops		78		2,600	2,198
Accessories		95		2,250	845

Total overhead cost to be allocated: $321,560

After constructing your spreadsheet answer the following questions?

What is the total cost per unit of each product line when machine hours are used as the cost driver for overhead allocation?
How much overhead is allocated to Jackets when direct labor hours are used as the cost driver for overhead allocation?
What is the total cost of Tops when direct labor hours are used as the cost driver for overhead allocation?
What is the total cost per unit of Accessories when the number of batches is used as the cost driver for overhead allocation?
What is the allocation rate when units are used as the cost driver?
If you are the manager of the Jackets product line which cost driver would you prefer? Why?
Currently the OH cost are being allocated based on DL hours. If the company decides to use units as the cost driver how would you react if you are the Accessories product line manager?

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Expert Solution

ekkarill92 answered 5 months ago

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