McClellan Recreation manufactures and sells two models of paddle boards: Starter and Pro. The Starter model is a basic board usedfor instruction and purchased by novices. The Pro model is made with premium materials and comes with several accessories. Theboards are produced to order, and there are no inventories at the end of the year.The cost accounting system at McClellan allocates overhead to products based on direct labor cost. Overhead in year 1, which justended, was $2,536,800. Data on units sold for year 1 along with the unit sales price and unit direct costs for the two models follow:Sales price per unitDirect materials per unitDirect labor per unitRequired:a. Compute product line profits or loss for the Starter model and the Pro model for year 1.b. A study of overhead shows that without the Starter model, overhead would fall to $1,442,000. Assume all other revenues and costswould remain the same for the Pro model in year 2. Compute product line profits for the Pro model in year 2 assuming the Startermodel was not produced or sold.Required A Required BStarter Model(12,000 units)$33187107Complete this question by entering your answers in the tabs below.Pro Model(4,000 units)$ 621157132StarterProCompute product line profits or loss for the Starter model and the Pro model for year 1.Note: Loss amounts should be indicated by a minus sign.Profit or Loss

Keep or drop decision is taken by the management when there are two or more operating segments and…

Answered: a. Compute product line profits or loss…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...

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Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500 machine hours. The cost to make Job 416 is $95 in neon, 15 hours of labor at $13 per hour, and five machine hours. During the month, it incurs $95 in indirect material cost, $130 in administrative labor, $320 in utilities, and $350 in depreciation expense. What is the predetermined overhead rate if machine hours are considered the cost driver? What is the cost of Job 416? What is the overhead incurred during the month?
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $25 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehighton's first two years of operation is as follows: Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costs: Variable Fixed Based on absorption costing Finished-goods inventory Retained earnings Year 1 2,600 3,100 $15,500 18,600 Based on variable costing Finished-goods inventory Retained earnings LEHIGHTON CHALK COMPANY Selected Balance Sheet Information End of Year 1 10,400 9,400 $ 5,500 11,100 Selected information…
Kima Company manufactures and sells two models of a home appliance. The Standard model is a basic appliance with mostly manual features, while the Galaxy model is highly automated. The appliances are produced to order, and there are no inventories at the end of the year. The cost accounting system at Kima allocates overhead to products based on direct labor cost. Overhead in year 1, which just ended, was $2,957,500. Other data for year 1 for the two products follow. Sales revenue Direct materials Direct labor Standard Model (20,000 units) $6,130,000 2,530,000 1,730,000 Galaxy Model (3,000 units) $2,830,000 430,000 545,000 Required: a. Compute product line profits/loss for the Standard model and the Galaxy model for year 1. b. A study of overhead shows that without the Standard model, overhead would fall to $2,315,000. Assume all other revenues and costs would remain the same for the Galaxy model in year 2. Compute product line profits/loss for the Galaxy model in year 2 assuming the…
Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At year-end, Anthony, the company's founder and CEO, gives you the following information regarding Oberti's operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $8,000 Work in Process Inventory $26,000 Finished Goods Inventory $32,000 2. During the year, the company purchased raw materials costing $97,000. All purchases were made on account. 3. The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit…
uzadis Company makes furniture using the latest automated technology. The company uses a ob-order costing system and applies manufacturing overhead cost to products based on nachine-hours. The predetermined overhead rate was based on a cost formula that estimates $592,000 of total manufacturing overhead for an estimated activity level of 74,000 machine- ours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and puild inventories. The company provided the following data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $37,520) Finished goods (includes overhead applied of $101,840) Cost of goods sold (includes overhead applied of $396,640) Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. Complete this question by…
Waterway Guitar Company makes high-quality customized guitars. Waterway uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $307,500 and that 20,500 direct labor hours would be worked. At year-end, Daniel, the company’s founder and CEO, gives you the following information regarding Waterway’s operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $7,900 Work in Process Inventory $26,000 Finished Goods Inventory $31,500 2. During the year, the company purchased raw materials costing $102,000. All purchases were made on account. 3. The production department requisitioned $98,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,500 direct labor hours at a cost…
Cycle-up manufactures reusable bags. Cycle-up allocates manufacturing overhead based on direct labor hours. Cycle-up expects to use 20,000 direct labor hours for the year and 10,000 machine hours. Total manufacturing overhead costs are estimated to be $400,000. Job 555 used 22 direct labor hours and 10 machine hours. How much manufacturing overhead should be allocated to job 555? (Do not put dollar sign in the answer for this submission )
Wheeler's Bike Company manufactures custom racing bicycles. The company uses a job order cost system to determine the cost of each bike. Estimated costs and expenses for the coming year follow: Bike parts Factory machinery depreciation Factory supervisor salaries Factory direct labor Factory supplies Factory property tax Advertising cost Administrative salaries Administrative-related depreciation Total expected costs Required: 1. Calculate the predetermined overhead rate per direct labor hour if the average direct labor rate is $11.91 per hour. 2. Determine the amount of applied overhead if 18,600 actual hours are worked in the upcoming year. Required 1 Required 2 Complete this question by entering your answers in the tabs below. $ 341,800 61,500 140,000 211,998 Predetermined Overhead Rate 39,400 33,750 22,500 55,000 19, 200 $925,148 Calculate the predetermined overhead rate per direct labor hour if the average direct labor rate is $11.91 per hour. Note: Round your answer to 2 decimal…
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = $520,475 + $1.49X, where X equals number of smokers. Last year, SmokeCity produced 19,100 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? For questions 2-4, Enter the final answers rounded to the nearest dollar. 2. What is the total overhead cost incurred by SmokeCity last year? $fill in the blank 2 3. What is the total fixed overhead cost incurred by SmokeCity last year? $fill in the blank 3 4. What is the total variable overhead cost incurred by SmokeCity last year? $fill in the blank 4 For questions 5-7, round your answers to the nearest cent. Use those rounded figures in subsequent computations, if necessary. 5. What is the overhead cost per unit produced? $fill in the blank 5 per unit 6. What is the fixed overhead cost…

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