Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the companys two versions of
Question:
Manufacturing overhead is currently assigned to products based on their direct labor costs.
For the most recent month, manufacturing overhead was $280,000. During that time, the company produced 12,000 units of the M-008 and 2,000 units of the M-123. The direct costs of production were as follows:
Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows:
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?
c. Draft a memo for the plant manager explaining why the two systems result in different costs along with your recommendation for which costing system to use.
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Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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