The Jackson Company has always allocated all overhead costs to products based upon the number of units produced. Over the years overhead costs have grown enormously and the firm’s profits have been falling. During this same time the firm has substantially broadened the lines of products it produces.

During the past year overhead amounted to RMB1.65 million. A study reveals that RMB350,000 of this is primarily depreciation on buildings and equipment, heat, light, and similar common costs. The remaining RMB1,300,000 is primarily for salaries for people who manage the flow of production, production schedulers, expeditors, equipment setup workers, and others needed to modify production lines whenever a department switches from manufacturing one type of product to another.

The following historical records have been developed for these production expeditors.

OVERHEAD: RMB 1,650,000

DEPRECIATION: RMB 350,000

SALARIES: RMB 1,300,000

	Total Units	Number of	Number of	Expeditors’
Year	Produced	Product Lines	Expeditors	Salaries
2015	2,400,000	78	4	RMB184,000
2016	2,600,000	114	6	282,000
2017	2,750,000	165	9	436,500
2018	2,550,000	240	12	606,000
2019	2,700,000	360	18	927,000
2020	2,500,000	480	25	1,300,000

Last year’s production and the direct costs incurred for a small sample of the firm’s products are summarised below:

	Product
	J-275	R-895	T-28A	Y-477
Number of units	200,000	1,000	14,000	90,000
Material costs	RMB235,000	RMB590	RMB2,800	RMB50,000
Labour Costs	RMB65,000	RMB80	RMB1,100	RMB10,000

**Required Answer all the questions in detail (a,b)

a.         Develop the cost of each product in the sample using the firm’s current (2020) Allocation Base.

(Please attach your calculation details)

b.         Develop two allocation bases, one spreading common costs over units produced and a second spreading production expediting costs over product lines. Determine the cost of each product in the sample using these two new rates.

(Please attach your calculation details)

Answer rating: 100% (QA)

a Current Cost Allocation Base for each product J275 R895 T28A Y477 Remarks Direct Material 235000 5... View the full answer