Question

Kiawanee Corp. manufactures Products X, Y, and Z. These products have the following costs and production operating statistics:
The company’s total overhead cost is $2,458,000, which is comprised of costs for the following activities (shown with an appropriate cost driver):
The competitive market process has set the selling prices of Products X, Y, and Z at $22, $30, and $90, respectively.
Required:
(a) Assume that the company applies overhead on a direct labor hour basis. Determine the overhead cost (round to two decimal points) per direct labor hour. Determine the total cost per unit of Products X, Y, and Z.
(b) Using the information determined in part (a) and the sales prices given, what decision might Kiawanee management make about its products?
(c) Calculate the overhead cost per activity if the designated cost drivers are used.
(d) Determine the cost per unit of Products X, Y, and Z if the company applies overhead on the activity-based costing information developed in part (c).
(e) Using the information determined in part (d) and the sales prices given, what decision might Kiawanee management make about its products? Why does this decision differ from that determined in part (b)?
(f) Is Kiawanee using the appropriate cost drivers? Give an alternate suggestion for each cost driver and explain why that suggestion was made.


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  • CreatedMarch 27, 2015
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