Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happening in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month manufacturing overhead was $214,200. During that time, the company produced 9,520 units of Model SF-08 and 2,380 units of Model SF-48. The direct costs of production were as follows: Direct materials. Direct labor SF-08 SF-48 $ 190,400 $ 107,100 142,800 95,200 Cost Driver Direct material costs. Number of production runs Number of inspections Total overhead Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: Total $ 297,500 238,000 Overhead Costs $ 59,500 64,260 90,440 $ 214,200 Activity Level SF-08 190,400 20 8 SF-48 107,100 40 11 Total 297,500 60 19 Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product?
Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happening in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month manufacturing overhead was $214,200. During that time, the company produced 9,520 units of Model SF-08 and 2,380 units of Model SF-48. The direct costs of production were as follows: Direct materials. Direct labor SF-08 SF-48 $ 190,400 $ 107,100 142,800 95,200 Cost Driver Direct material costs. Number of production runs Number of inspections Total overhead Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: Total $ 297,500 238,000 Overhead Costs $ 59,500 64,260 90,440 $ 214,200 Activity Level SF-08 190,400 20 8 SF-48 107,100 40 11 Total 297,500 60 19 Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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answer in text form please (without image)
Transcribed Image Text:Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The
company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the
models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in
applications where the precision is critical and thus requires greater oversight in the production process.
Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance
to the pricing for SF-08, although there seems to be little need for negotiation on the price of the SF-48 model. As a
result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to
understand better what might be happening in the market.
Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month
manufacturing overhead was $214,200. During that time, the company produced 9,520 units of Model SF-08 and
2,380 units of Model SF-48. The direct costs of production were as follows:
Direct materials
Direct labor
Cost Driver
Direct material costs
Number of production runs
Number of inspections
Total overhead
Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last
month were as follows:
Required A
SF-08
SF-48
$ 190,400 $ 107,100
142,800
95,200
Required B
Total overhead
Total unit cost
Overhead Costs
$ 59,500
64,260
90,440
$ 214,200
SF-08
Total
$ 297,500
238,000
Complete this question by entering your answers in the tabs below.
Activity Level
Required:
a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead?
What is the total cost per unit produced for each product?
b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What
is the total cost per unit produced for each product?
SF-48
SF-08
190,400
< Required A
20
8
SF-48
107, 100
40
11
How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the
total cost per unit produced for each product?
Note: Round "Total unit cost" to 2 decimal places.
Total
297,500
Required B
60
19
>
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