1. Answer the following questions:

1. If BLP, Inc. uses ABC cost allocation and ABC is deemed to be the most accurate, what can you say about the calculated costs of the Standard and Deluxe product under the plantwide and departmental methods (i.e., would there have been undercoating or overcasting of each product?)

2. Again, if ABC cost allocation is deemed to be most accurate, how would prices differ under that method compared to the plantwide and departmental methods (i.e., would there have been underpricing or overpricing of each product?)

3. Using the traditional allocation method, which product, if any, would BLP, Inc. possibly have considered dropping?

4. Using the departmental allocation method, which product, if any, would BLP, Inc. possibly have considered dropping?

5. Using the ABC allocation method, which product, if any, would BLP, Inc. possibly have considered dropping? Should it drop that product? Indicate the financial impact of that decision – i.e., any additional costs or cost savings). What will net operating income be without that product if you suggest dropping one?

2. After performing these calculations, you decide to use 2022 monthly data to try and separate manufacturing overhead in the Molding Department into fixed and variable components by applying the high low method. The 2022 data is shown here:

Year	Machine Hours in the Molding Department	Molding Department Total Manufacturing Overhead
January	1,500	$59,750
February	1,980	$66,100
March	1,875	$66,815
April	2,045	$71,550
May	3,625	$82,060
June	1,420	$62,175
July	2,015	$69,800
August	1,540	$64,350
September	1,020	$55,725
October	1,250	$60,400
November	2,590	$77,275
December	1,140	$51,500

1. What is the variable manufacturing overhead cost estimated to be in the Molding Department? (rounded to the nearest cent – i.e., $XX.XX)
2. What is the fixed manufacturing overhead cost estimated to be in the Molding Department? (rounded to the nearest whole dollar)
3. If 1,675, 2,000, and 2,300 machine hours are estimated to be used in January, February, and March 2023, respectively, in the Molding Department, what is the expected Molding Department Manufacturing Overhead Cost for that month? Show the variable, fixed, and total amount.
4. If the Molding department depreciation is expected to be $12,500 of fixed manufacturing overhead cost each month, prepare a partial manufacturing overhead budget only for the Molding Department for the first quarter of 2023 making sure to also show the related cash disbursements.

3. Assume BLP uses departmental allocation rates. One of BLP’s customers would like to place a special order for tents that are a hybrid between the Standard and Deluxe models. The hybrid will have the same direct material requirements as the Deluxe tent and the same direct labor requirements per unit and molding MH requirements of the Standard tent. Assuming that the company has enough capacity to satisfy the special order along with current regular business, what is the minimum price that BLP should accept per unit for the special order? Use your calculations from #21 to help you with this. Other than the portion of Molding overhead that is variable, assume all other Molding and Assembly and Packaging manufacturing overhead is considered fixed. Also assume that other than a $10 per unit commission associated with the special order, all other selling and administrative expenses are fixed.

Answer rating: 100% (QA)

ANSWERS 1 If BLP Inc uses ABC cost allocation and ABC is deemed to be the most accurate the calculat... View the full answer