Case #1 Palace Inc. manufactures two product lines (Deluxe and Standard). Currently, the company allocates overhead...
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Case #1 Palace Inc. manufactures two product lines (Deluxe and Standard). Currently, the company allocates overhead costs to the product lines based on direct labour hours. For 2021, the company gathered the following data for the two product lines: Deluxe Standard Sales (in units) 5,000.00 40,000.00 Sales price (per unit) $11,700.00 $8,550.00 Direct materials and direct labour costs per unit $3,240.00 $2,340.00 Manufacturing support costs per unit $1,320.00 $1,860.00 Last year, the company purchased an expensive piece of equipment that enabled the company to add more sophisticated options to the Deluxe product line. In response, the CFO suggested that the company implement an activity-based costing (ABC) system to provide useful information for product mix and advertising strategy purposes. To help with this decision, the company's cost accountant gathered the following data: Activity Setups Machine-related Packing Inspection Required Cost Driver Number of setups Number of machine hours Number of shipments Number of inspection hours Cost Deluxe Standard Total $850,000 800.00 200.00 1,000.00 $57,400,000 700,000.00 700,000.00 1,400,000.00 $9,000,000 75,000.00 300,000.00 375,000.00 $13,750,000 178,250.00 165,500.00 343,750.00 Total manufacturing overhead costs $81,000,000 (A) Using the current costing system, compute the total manufacturing cost per unit and the profit per unit for each product line. (B) Using ABC, compute the total manufacturing overhead cost that would be allocated to each product line and the manufacturing overhead per unit for each product line. (C) Using ABC, compute the total manufacturing cost per unit and the profit per unit for each product line. 1 Case #1 Palace Inc. manufactures two product lines (Deluxe and Standard). Currently, the company allocates overhead costs to the product lines based on direct labour hours. For 2021, the company gathered the following data for the two product lines: Deluxe Standard Sales (in units) 5,000.00 40,000.00 Sales price (per unit) $11,700.00 $8,550.00 Direct materials and direct labour costs per unit $3,240.00 $2,340.00 Manufacturing support costs per unit $1,320.00 $1,860.00 Last year, the company purchased an expensive piece of equipment that enabled the company to add more sophisticated options to the Deluxe product line. In response, the CFO suggested that the company implement an activity-based costing (ABC) system to provide useful information for product mix and advertising strategy purposes. To help with this decision, the company's cost accountant gathered the following data: Activity Setups Machine-related Packing Inspection Required Cost Driver Number of setups Number of machine hours Number of shipments Number of inspection hours Cost Deluxe Standard Total $850,000 800.00 200.00 1,000.00 $57,400,000 700,000.00 700,000.00 1,400,000.00 $9,000,000 75,000.00 300,000.00 375,000.00 $13,750,000 178,250.00 165,500.00 343,750.00 Total manufacturing overhead costs $81,000,000 (A) Using the current costing system, compute the total manufacturing cost per unit and the profit per unit for each product line. (B) Using ABC, compute the total manufacturing overhead cost that would be allocated to each product line and the manufacturing overhead per unit for each product line. (C) Using ABC, compute the total manufacturing cost per unit and the profit per unit for each product line. 1
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A Using the current costing system Total manufacturing cost per unit Direct materials and direct labor costs per unit Manufacturing support costs per unit Profit per unit Sales price per unit Total ma... View the full answer
Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
Posted Date:
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