PART 1: COMPLETING MISSING INFORMATION BONZZE Electronics manufactures two large-screen television models: the Foyale which sells for $1,800, and a new model, the Lajestic, which sells for $1,350. The production cost computed per unit under traditional costing for each model in 2021 was as follows. Traditional Costing Foyale Direct materials Direct labor ($20 per hour) Mfg overhead ($38 per DLH) Total per unit cost $1,200 In 2021, BONZZE manufactured 26,000 units of the Foyale and 10,000 units of the Lajestic. The overhead rate of $38 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,500,000 by the total direct labor hours (200,000) for the two models. Cost Driver Number of orders Number of setups Machine hours $800 150 250 Under traditional costing, the gross profit on the models was Foyale $600 or ($1,800 - $1,200), and Lajestic $570 or ($1,350 - $780). Because of this difference, management is considering phasing out the Foyale model and increasing the produc- tion of the Lajestic model. Activity Purchasing Machine setups Machining Quality control Number of inspections Before finalizing its decision, management asks BONZZE's controller to prepare an analysis using activity-based costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2021. The cost drivers used for each product were: Cost Driver Purchase orders Machine setups Machine hours Inspections Foyale 17,000 5,000 75,000 11,000 Lajestic $450 120 210 $780 Estimated Overhead $1,280,000 918,000 4,800,000 700,000 Lajestic 23,000 13,000 45,000 17,000 Expected Use of Cost Drivers 40,000 18,000 120,000 28,000 Total 40,000 18,000 120,000 28,000 Required: A. Assign the total 2021 manufacturing overhead costs to the two products using activity-based costing (ABC). What was the cost per unit and gross profit of each model using ABC costing? B. Are management's future plans for the two models sound? Why?
PART 1: COMPLETING MISSING INFORMATION BONZZE Electronics manufactures two large-screen television models: the Foyale which sells for $1,800, and a new model, the Lajestic, which sells for $1,350. The production cost computed per unit under traditional costing for each model in 2021 was as follows. Traditional Costing Foyale Direct materials Direct labor ($20 per hour) Mfg overhead ($38 per DLH) Total per unit cost $1,200 In 2021, BONZZE manufactured 26,000 units of the Foyale and 10,000 units of the Lajestic. The overhead rate of $38 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,500,000 by the total direct labor hours (200,000) for the two models. Cost Driver Number of orders Number of setups Machine hours $800 150 250 Under traditional costing, the gross profit on the models was Foyale $600 or ($1,800 - $1,200), and Lajestic $570 or ($1,350 - $780). Because of this difference, management is considering phasing out the Foyale model and increasing the produc- tion of the Lajestic model. Activity Purchasing Machine setups Machining Quality control Number of inspections Before finalizing its decision, management asks BONZZE's controller to prepare an analysis using activity-based costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2021. The cost drivers used for each product were: Cost Driver Purchase orders Machine setups Machine hours Inspections Foyale 17,000 5,000 75,000 11,000 Lajestic $450 120 210 $780 Estimated Overhead $1,280,000 918,000 4,800,000 700,000 Lajestic 23,000 13,000 45,000 17,000 Expected Use of Cost Drivers 40,000 18,000 120,000 28,000 Total 40,000 18,000 120,000 28,000 Required: A. Assign the total 2021 manufacturing overhead costs to the two products using activity-based costing (ABC). What was the cost per unit and gross profit of each model using ABC costing? B. Are management's future plans for the two models sound? Why?
Managerial Accounting: The Cornerstone of Business Decision-Making
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Chapter9: Profit Planning And Flexible Budgets
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Problem 64E: Use the following information for Exercises 9-63 and 9-64: Palladium Inc. produces a variety of...
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Transcribed Image Text:PART 1: COMPLETING MISSING INFORMATION
BONZZE Electronics manufactures two large-screen television models: the Foyale which sells for $1,800, and a new model,
the Lajestic, which sells for $1,350. The production cost computed per unit under traditional costing for each model in 2021
was as follows.
Traditional Costing
Foyale
Lajestic
Direct materials
Direct labor ($20 per hour)
Mfg overhead ($38 per DLH)
Total per unit cost
$1,200
In 2021, BONZZE
manufactured 26,000 units of the Foyale and 10,000 units of the Lajestic. The overhead rate of $38 per
direct labor hour was determined by dividing total expected manufacturing overhead of $7,500,000 by the total direct labor
hours (200,000) for the two models.
Under traditional costing, the gross profit on the models was Foyale $600 or ($1,800 - $1,200), and Lajestic $570 or ($1,350 -
$780). Because of this difference, management is considering phasing out the Foyale model and increasing the produc- tion of
the Lajestic model.
Cost Driver
Number of orders
Number of setups
Machine hours
Before finalizing its decision, management asks BONZZE's controller to prepare an analysis using activity-based costing
(ABC). The controller accumulates the following information about overhead for the year ended December 31, 2021.
Expected Use of
Activity
Purchasing
Machine setups
Machining
Quality control Number of inspections
$800
150
250
The cost drivers used for each product were:
Cost Driver
Purchase orders
Machine setups
Machine hours
Inspections
Foyale
17,000
5,000
75,000
11,000
$450
120
210
$780
Estimated
Overhead
$1,280,000
918,000
4,800,000
700,000
Lajestic
23,000
13,000
45,000
17,000
CostDrivers
40,000
18,000
120,000
28,000
Total
40,000
18,000
120,000
28,000
Required:
A. Assign the total 2021 manufacturing overhead costs to the two products using activity-based costing (ABC). What was the
cost per unit and gross profit of each model using ABC costing?
B. Are management's future plans for the two models sound? Why?
Transcribed Image Text:Paper No. 2
PART 1: A-COMPLETING THE FOLLOWING TABLES (Notes: You are required to show all relevent computations on the other side of this paper.)
Dovale
Gajestic
Rate
Cost Assigned Total Overhead
Overhead Rate
Purchase orders
Machine setups
Machine hours
Inspections
Total assigned costs
Units produced
Cost per unit
Direct materials
Direct labor
Manufacturing overhead
Total cost per unit
Sales price per unit
Cost per unit
Gross profit
Drivers Used
Cost Assigned
Drivers Used
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