Exercise MC$\_2-$ Plantwide versus Department$-$Specific Rates

At its Port Arthur, Texas, manufacturing facility, Joplin Industries makes two types of digital

cameras: J$25$P and J$40$X$.$ Production at the Port Arthur facility takes place in two buildings,

Assembly and Packaging. The following exhibit shows data on the operations of the Port Arthur

facility for the third quarter.

Number of units

Direct costs:

Direct Materials

Direct Labor $-$ Assembly

Direct Labor $-$ Packaging

Manufacturing fixed overhead costs:

Assembly building

Packaging building

$1,800,000$

$950,000$

The machine hours available in the assembly center for the period total $50,000.$

Required:

Determine the full cost per unit of the two products assuming that the traditional product

costing system of Joplin Industries is in use. That system allocates manufacturing

overhead to products using a plantwide rate based on direct labor costs.

Determine the full cost per unit of the two products assuming that a new costing system is

put in place. This new system allocates manufacturing overhead to products using a two$-$

stage allocation process in relation to which "Assembly" and "Packaging" represent the two

intermediate cost centers. The cost rate for the packaging department remains based on

direct labor costs. That for the assembly department, on the other hand, is calculated using

machine hours as the basis for allocation of indirect costs. In answering this question

imagine, applying:

a$.$ the so called "push approach"

b$.$ the alternative "pull approach"

with reference to the only situation in which this is possible, given the data, determines

the cost of unused production capacity.