Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and...

 

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Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,061,000 based on production of 320,000 handheld consoles and 119,000 home consoles. Direct labor and direct materials costs were as follows: Direct labor Materials Handheld $916,250 710,000 Cost Driver Number of production runs Quality tests performed Shipping orders processed Total overhead Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows: Activity Level Handheld Home Home $410,000 664,000 Handheld Home Total $1,326,250 1,374,000 Costs Assigned Handheld $385,000 522,000 154,000 $1,061,000 Overhead Total Cost per Unit Overhead Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total cost per unit" to 2 decimal places.) 30 10 90 Total Cost per Unit Home 5 19 50 Total b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round "Total cost per unit" to 2 decimal places.) 35 29 140 Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,061,000 based on production of 320,000 handheld consoles and 119,000 home consoles. Direct labor and direct materials costs were as follows: Direct labor Materials Handheld $916,250 710,000 Cost Driver Number of production runs Quality tests performed Shipping orders processed Total overhead Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows: Activity Level Handheld Home Home $410,000 664,000 Handheld Home Total $1,326,250 1,374,000 Costs Assigned Handheld $385,000 522,000 154,000 $1,061,000 Overhead Total Cost per Unit Overhead Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total cost per unit" to 2 decimal places.) 30 10 90 Total Cost per Unit Home 5 19 50 Total b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round "Total cost per unit" to 2 decimal places.) 35 29 140

Answer rating: 100% (QA)

computation of cost per consoles of two products ie ... View the full answer