Damili ti Amianan, Inc. manufactures iconic superhero figurines. All figurines are approximately the same size, but...

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Damili ti Amianan, Inc. manufactures iconic superhero figurines. All figurines are approximately the same size, but some are ceramic and others are fancy, with black leather capes and a metallic armour. Management is considering producing only the fancy figurines because the rate of return on sales is so much higher than it is on the ceramic figurines. The company's total production overhead is $5,017,500. Some additional data follow: Ceramic $15,000,000 8,250,000 1,500,000 200,000 Revenues Direct cost Production (units) Machine hours Direct labor hours Number of inspections 34,500 1,000 Fancy $16,800,000 8,750,000 350,000 50,000 153,625 6,500 Required: a. Damili ti Amianan, Inc. has consistently used machine hours to allocate overhead. Determine the profitability of each line of figurines, and decided whether the company should stop producing the ceramic figurines. b. The cost accountant has determine that production overhead cost can be assigned to separate cost pools. Pool #1 contains P1,260,000 of overhead cost of which the most appropriate cost driver is machine hours; Pool #2 contains $2,257,500 of overhead costs for which the most appropriate cost driver is direct labor hours; and Pool # 3 contains #1,500,000 of overhead cost of which the most appropriate cost driver is number of inspections. Compute the overhead cost that should be allocated to each type of figurine using this methodology. c. Discuss what management decision should be. Damili ti Amianan, Inc. manufactures iconic superhero figurines. All figurines are approximately the same size, but some are ceramic and others are fancy, with black leather capes and a metallic armour. Management is considering producing only the fancy figurines because the rate of return on sales is so much higher than it is on the ceramic figurines. The company's total production overhead is $5,017,500. Some additional data follow: Ceramic $15,000,000 8,250,000 1,500,000 200,000 Revenues Direct cost Production (units) Machine hours Direct labor hours Number of inspections 34,500 1,000 Fancy $16,800,000 8,750,000 350,000 50,000 153,625 6,500 Required: a. Damili ti Amianan, Inc. has consistently used machine hours to allocate overhead. Determine the profitability of each line of figurines, and decided whether the company should stop producing the ceramic figurines. b. The cost accountant has determine that production overhead cost can be assigned to separate cost pools. Pool #1 contains P1,260,000 of overhead cost of which the most appropriate cost driver is machine hours; Pool #2 contains $2,257,500 of overhead costs for which the most appropriate cost driver is direct labor hours; and Pool # 3 contains #1,500,000 of overhead cost of which the most appropriate cost driver is number of inspections. Compute the overhead cost that should be allocated to each type of figurine using this methodology. c. Discuss what management decision should be.

Answer rating: 100% (QA)

a To determine the profitability of each line of figurines and decide whether the company should stop producing the ceramic figurines we need to calculate the contribution margin for each product line ... View the full answer