Marine, Inc., manufactures a product that is available in both a flexible and a rigid model....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $648,000 in overhead costs would be incurred and the company would produce and sell 2,000 units of the flexible model and 8,000 units of the regular model. The flexible model requires 2.4 hours of direct labor time per unit, and the regular model requires 1.20 hours. Direct materials and labor costs per unit are given below: Flexible Direct materials cost per unit Direct labor cost per unit Rigid $ 65 $ 15 $120 $ 40 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Flexible Rigid Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine-hours) Overhead Cost Total $ 22,000 12,000 220,000 394,000 120 155 275 70 80 150 1,000 1,100 1,200 3,825 2,200 4,925 $648,000 Compute the activity rate for each of the activity cost pools. 3-a. Úsing activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Reg 18 Req 2 Req 3A Reg 3B Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Predetermined overhead rate per DLH Reg 1A Req 18 Req 2 Reg 3A Req 3B Compute the unit product cost for one unit of each model. Unit Product Cost Flexible Rigid Req 1A Req 18 Req 2 Req 3A Req 3B Compute the activity rate for each of the activity cost pools. Activity Cost Pool Activity Rate per order per request Purchase orders Rework requests Product testing per test Machine-related per MH Req 1A Req 18 Req 2 Req 3A Req 3B Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. Total Amount of Overhead Flexible Rigid Req 1A Req 18 Req 2 Req 3A Req 3B Using activity-based costing, compute the unit product cost for one unit of each model. (Do not round intermediate calculations and round your answers to 2 decimal places.) Unit Product Cost Flexible Rigid Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $648,000 in overhead costs would be incurred and the company would produce and sell 2,000 units of the flexible model and 8,000 units of the regular model. The flexible model requires 2.4 hours of direct labor time per unit, and the regular model requires 1.20 hours. Direct materials and labor costs per unit are given below: Flexible Direct materials cost per unit Direct labor cost per unit Rigid $ 65 $ 15 $120 $ 40 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Flexible Rigid Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine-hours) Overhead Cost Total $ 22,000 12,000 220,000 394,000 120 155 275 70 80 150 1,000 1,100 1,200 3,825 2,200 4,925 $648,000 Compute the activity rate for each of the activity cost pools. 3-a. Úsing activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Reg 18 Req 2 Req 3A Reg 3B Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Predetermined overhead rate per DLH Reg 1A Req 18 Req 2 Reg 3A Req 3B Compute the unit product cost for one unit of each model. Unit Product Cost Flexible Rigid Req 1A Req 18 Req 2 Req 3A Req 3B Compute the activity rate for each of the activity cost pools. Activity Cost Pool Activity Rate per order per request Purchase orders Rework requests Product testing per test Machine-related per MH Req 1A Req 18 Req 2 Req 3A Req 3B Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. Total Amount of Overhead Flexible Rigid Req 1A Req 18 Req 2 Req 3A Req 3B Using activity-based costing, compute the unit product cost for one unit of each model. (Do not round intermediate calculations and round your answers to 2 decimal places.) Unit Product Cost Flexible Rigid
Expert Answer:
Related Book For
Introduction to Managerial Accounting
ISBN: 978-0078025792
7th edition
Authors: Peter Brewer, Ray Garrison, Eric Noreen
Posted Date:
Students also viewed these accounting questions
-
Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap...
-
Rehm Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several...
-
Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several...
-
You are in the market for a new car and have narrowed your search down to two types: Car X costs $36,300, will last for four years, and will be worth $3,630 at the end of its useful life. It will...
-
How is the residual theory of dividends used to explain observed dividend payments? How is this theory in conflict with evidence suggesting that corporate managers smooth dividends?
-
Atom Endeavour Co. issued $210 million face amount of 8.5% bonds when market interest rates were 8.64% for bonds of similar risk and other characteristics. Required: a. How much interest will be paid...
-
Describe a training program for expatriates. In what ways do HRIS help improve their effectiveness and efficiency? Why is it recommended that the family of the expatriate also receive training?
-
Consider the intersection of two shocks of opposite families, as sketched in Fig. 4.23. For M 1 = 3, p 1 = 1 atm, ? 2 = 20?, and ? 3 = 15?, calculate the pressure in regions 4 and 4?, and the flow...
-
Rather than use performance standards or a tax, the EPA decides to establish a market in pollution rights. They set the supply of pollution permits at ES =130 (in order to achieve the desired...
-
Ariana and Nicholas Peterson are about to construct their income and expense statement for the year ending December 31, 2020. They have put together the following income and expense information for...
-
To what extent does the cultivation of a robust self-concept or self-identity contribute to the enhancement of one's mental health?
-
Sketch, and explain the main features of, a profit-volume chart.
-
What is the average tax rate paid by a single person with an$60,000 adjusted gross income for 2008?
-
Compare renting movies from a box store, versus mail, versus streaming. How does each successive model eliminate value-chain activities?
-
When the Giants and Patriots football teams play each other, can one of the quarterbacks have a higher passing percentage in each half while having a lower passing percentage for the entire game?
-
N = 150, n = 20, k = 30, x = 5 A hypergeometric probability experiment is conducted with the given parameters. Compute the probability of obtaining x successes.
-
Use the Fe-C phase diagram at the end to answer the following questions. A 0.55 wt% carbon steel is slow cooled from 1000C to a temperature slightly below 727C. In the final structure: (a) Sketch and...
-
What are some of the features of the Unified Process (UP)?
-
What does a flexible budget enable that a simple comparison of the planning budget to actual results does not do?
-
Greenwood Company manufactures two products-14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is considering...
-
The management of Kunkel Company is considering the purchase of a $27,000 machine that would reduce operating costs by $7,000 per year. At the end of the machine's five-year useful life, it will have...
-
Pick any three of the sources of prospects discussed in the chapter and pick a product or service you like. Develop several ideas for how you would use each source to locate leads for the product or...
-
Why do you think a salesperson might experience call reluctance? How can it be overcome?
-
List three or four criteria you could use to qualify a lead as a likely prospect. How would you find out if the lead meets these criteria?
Study smarter with the SolutionInn App