Taveras Corporation is currently operating with 50% of its current production capacity. It uses a work order
Question:
Taveras Corporation is currently operating with 50% of its current production capacity. It uses a work order costing system with a predetermined plant-wide overhead rate based on machine hours. The company made the following forecasts at the beginning of the year:
Machine hours required to support estimated production. . . . 165,000
Fixed overhead cost of production. . . . . . . . . . . . . . . . . . . . . . . $1,980,000
Variable overhead cost per machine hour. . . . $2.00
Required:
1. Calculate the predetermined overhead rate throughout the facility. Within 2 years, the Job P90 was launched, completed and sold to the customer for $2,500. The following information was available regarding this job:
direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,150
Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 dollars
Used machine-clock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
2. Calculate the total production cost assigned to job P90.
3. After comparing the sales revenue of the Job P90 to the total cost of production, the company's chief financial officer said, "If the same opportunity comes through our front door tomorrow, I'd turn it down rather than make it and sell it for $2,500."
A. Construct an argument (supported by numerical analysis) that refutes the chief financial officer's claim.
B. Construct an argument (accompanied by numerical analysis) that supports the chief financial officer's claim.
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer