Amber Company produces electronic fish finders. It makes two different fish finders: the standard model, which is
Question:
Amber Company produces electronic fish finders. It makes two different fish finders: the standard model, which is produced in bulk and sells for $200, and the deluxe model, which comes in various configurations and sells for $400. Amber’s engineering and design overhead cost for 2012 is $70,000. The following information relates to production in 2012:
Number of different machine setups needed for a standard model production run . . . . . . . 4
Number of different machine setups needed for a deluxe model production run . . . . . . . . . 10
Number of standard fish finders produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Number of deluxe fish finders produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Number of engineering design changes needed on the standard model . . . . . . . . . . . . . . . . . . 7
Number of engineering design changes needed on the deluxe model . . . . . . . . . . . . . . . . . . . . 3
Average batch size per production run for standard model . . . . . . . . . . . . . . . . . . . . . . . . . . . 450
Average batch size per production run for deluxe model . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Required:
1. Determine the engineering and design costs to be assigned to standard and deluxe fish finders using the following allocation methods:
a. Number of units produced
b. Number of setups required
c. Number of engineering design changes needed
2. Which allocation method do you believe is most equitable?
Step by Step Answer:
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain