Koontz Company manufactures two models of industrial components-a Basic model and an Advanced model. The company...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Koontz Company manufactures two models of industrial components-a Basic model and an Advanced model. The company considers all of its manufacturing overhead costs to be fixed and uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Number of units produced and sold Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) Basic 20,000 $ 3,000,000 2,300,000 700,000 720,000 Advanced 10,000 $ 2,000,000 1,350,000 650,000 480.000 Total 30,000 $ 5,000,000 3,650,000 1,350,000 1,200,000 $ (20,000) $ 170,000 $ 150,000 Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assemble and Pack $ 562,500 Manufacturing overhead costs Direct labor hours: Basic Advanced Machine hours: Basic Advanced Required: 1. Using the plantwide approach: Molding $ 787,500 10,000 5,000 12,000 10,000 a. Calculate the plantwide overhead rate. Total $ 1,350,000 20,000 10,000 30,000 15,000 12,000 10,000 b. Calculate the amount of overhead assigned to each product. 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding Direct labor-hours in Assemble and Pack Number of customer orders Setup hours Manufacturing Overhead $ 417,500 282,500 230,000 340,000 80,000 $ 1,350,000 She also determined the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Req 2C Req 3A Req 3B Req 3C Req 4 Req 5 Using the plantwide approach, calculate the plantwide overhead rate. Plantwide overhead rate per DLH < Req 1A Req 1B > Koontz Company manufactures two models of industrial components-a Basic model and an Advanced model. The company considers all of its manufacturing overhead costs to be fixed and uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Number of units produced and sold Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) Basic 20,000 $ 3,000,000 2,300,000 700,000 720,000 Advanced 10,000 $ 2,000,000 1,350,000 650,000 480.000 Total 30,000 $ 5,000,000 3,650,000 1,350,000 1,200,000 $ (20,000) $ 170,000 $ 150,000 Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assemble and Pack $ 562,500 Manufacturing overhead costs Direct labor hours: Basic Advanced Machine hours: Basic Advanced Required: 1. Using the plantwide approach: Molding $ 787,500 10,000 5,000 12,000 10,000 a. Calculate the plantwide overhead rate. Total $ 1,350,000 20,000 10,000 30,000 15,000 12,000 10,000 b. Calculate the amount of overhead assigned to each product. 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding Direct labor-hours in Assemble and Pack Number of customer orders Setup hours Manufacturing Overhead $ 417,500 282,500 230,000 340,000 80,000 $ 1,350,000 She also determined the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Req 2C Req 3A Req 3B Req 3C Req 4 Req 5 Using the plantwide approach, calculate the plantwide overhead rate. Plantwide overhead rate per DLH < Req 1A Req 1B >
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Dominic and Magalie have been married for five years and have thes children, aged four, seven and nine. Dominic and Magale are diverong and Magalie has been ordered to pay child support, until the...
-
Cieplak, Inc. is a U.S.-based MNC that has expanded into Asia. Its U.S. parent exports to some Asian countries, with its exports denominated in the Asian currencies. It also has a large subsidiary in...
-
A popular theory for managing risk to the firm that arises out of its management of working capital (that is, current assets and current liabilities) involves following some-thing called the...
-
The Manhattan Company has \($265\) million in assets, \($90\) million in current liabilities, \($135\) million in noncurrent liabilities, and \($40\) million in shareholders equity. Of the companys...
-
Do you believe that the $785,000 amount at the center of the Overstock-Grant Thornton dispute was material? Defend your answer. What factors other than quantitative considerations should have been...
-
10. How might a Utilitarian philosopher argue that Roe vs. Wade should not be overturned by the U.S. Supreme Court? Be sure to refer to specific Utilitarian ideas in your response. Remember that you...
-
3 Calculate Taxable Social Security Benefits - Line 5b on 1099; Using Form(s) SSA-1099 and info on 1099 below Department of the Treasury-Internal Revenue Service 1040 U.S. Individual Income Tax...
-
Harbortown Marine Products (HMP) manufactures and sells various fixtures for boat cabins. One fixture uses a specialized fitting that is not used in any other HMP product. The management of HMP has...
-
Use the information from 2021 to complete the amounts in Table 1 based on Statistics Canada's Current and Capital Account table and the financial accounts table. Major Account Current Account Capital...
-
At a company, the data set containing the ages of applicants for a particular job was normally distributed. The mean age of the applicants was 30 years old, and the standard deviation of the data set...
-
On a national mathematics assessment test, a random sample of 120 twelfth grade students has a mean score of 150 with a standard deviation of 34. (a)Construct a 90% confidence interval for the...
-
The following balances and amounts were taken from the financial statements of Ortiz, Inc. Accounts payable $35,000 Cash provided by operations $90,000 Accounts receivable 37,500 Net income 36,000...
-
Cebo Zikode started Formula Trucks Inc in 1999 and is famous in the racing business and has worked with many different suppliers. Formula Trucks Inc. manufactures high quality trucks, purchases and...
-
Calculate the change in entropy when 100 kJ of energy is transferred reversibly and isothermally as heat to a large block of copper at (i) 0 C, (ii) 50 C.
-
How does a potential investor decide whether to purchase capital or not?
-
The rent paid for land currently used to graze cattle would increase if a. the productivity of the land in cattle grazing increased. b. people decided to eat more red meat. c. oil deposits were...
-
Economic rent a. applies as a concept to land. b. is the payment to a resource in excess of its opportunity cost. c. will increase when the demand for input increases, if supply is perfectly...
Study smarter with the SolutionInn App