Tent Master produces two lines of tents sold to outdoor enthuslasts. The tents are cut to...
Question:
Tent Master produces two lines of tents sold to outdoor enthuslasts. The tents are cut to speclfications Itn department A. In department B the tents are sewn and folded. The activities, costs, and drivers assoclated With these two manufacturing processes and the company's production support activities follow.
| Process | Activity | Overhead Cost | Driver | Quantity |
|---|---|---|---|---|
| Department A | Pattern alignment | $113,280 | Batches | 960 |
| Cutting | 55,440 | Machine hours | 13,200 | |
| Moving product | 154,800 | Moves | 3,600 | |
| $323,520 | ||||
| Department B | Sewing | $492,800 | Direct labor hours | 6,400 |
| Inspecting | 45,000 | Inspectins | 750 | |
| Folding | 86,850 | Units | 28,950 | |
| $624,650 | ||||
| Support | Design | $484,000 | Modification orders | 440 |
| Providing space | 100,000 | Square feet | 10,000 | |
| Materials handling | 340,300 | Square yards | 830,000 | |
| $924,300 |
Additional production Information on the two lines of tents follows.
| Pup Tent | Pop-up Tent | |
|---|---|---|
| Units produced | 19,300 units | 9,650 units |
| Moves | 1,200 moves | 2,400 moves |
| Batches | 240 batches | 720 batches |
| Number of inspections | 300 inspections | 450 inspections |
| Machine hours | 8,000 LH | 5,200 MH |
| Direct labor hours | 4,000 DLH | 2,400 DLH |
| Modification orders | 110 modification orders | 330 modification orders |
| Space occupied | 5,000 square feet | 5,000 square feet |
| Material required | 490,000 square yards | 340,000 square yards |
1. Using a plantwide overhead rate based on direct labor hours, compute the overhead cost that is assigned to each pup tent ad each pop-up tent.
2. Using the plantwide overhead rate, determine the total cost per unit for the two products if the direct materials and direct labor cost is $18 per pup tent and $22 per pop-up tent.
3. Assume the market price of the pup tent is $75 and the market price of the pop-up tent is $160, determine the gross profit/loss per unit for each tent assuming overhead is assigned using the plantwide rate.
Will the product line be retained or eliminated?
4. Using ABC, compute the total cost per unit for each tent if the direct labor and direct materials cost is $18 per pup tent and $22 per pop-up tent.
5. Assume if the market price is $75 per pup tent and $160 per pop-up tent, determine the gross profit?/loss per unit for each tent.
Using Traditional Costing & Activity-Based Costing:
Traditional and activity-based costing are two methods that can be used to allocate manufacturing costs to products in a manufacturing company. The concept used by the two methods is similar but the activity-based system uses more cost allocations.
Answer and Explanation: 1
1.
| Estimated overhead cost | $1,872,470 |
| Estimated direct labor hours | 6,400 |
| Plantiwde overhead rate | $292.57 |
|---|
| Pup tent | Pop-up tent | |
|---|---|---|
| Direct labor hours used | 4,000 | 2,400 |
| Plantiwde overhead rate | $292.57 per DLH | $292.57 per DLH |
| Overhead allocated | $1,170,294 | $702,176 |
| Units produced | 19,300 | 9,650 |
| Overhead per unit | $60.64 | $72.76 |
2.
| Pup tent | Pop-up tent | |
|---|---|---|
| Direct materials and labor per unit | $18.00 | $22.00 |
| Overhead per unit | $60.64 | $72.76 |
| Total cost per unit | $78.64 | $94.76 |
3.
| Pup tent | Pop-up tent | |
|---|---|---|
| Selling price per unit | $75.00 | $160.00 |
| Total cost per unit | $78.64 | $94.76 |
| Profit per unit | $(3.64) | $65.24 |
4. & 5.
| Process | Activity | Overhead Cost | Driver | Quantity | Overhead rate | Allocated to Pup Tent | Allocated to Pop-up Tent |
|---|---|---|---|---|---|---|---|
| Department A | Pattern alignment | $113,280 | Batches | 960 | $118 pre batch | $28,320 | $84,960 |
| Cutting | 55,440 | Machine hours | 13,200 | 44.20 per machine hours | $33,600 | $21,840 | |
| Moving product | 154,800 | Moves | 3,600 | $43 pre move | $51,600 | $103,200 | |
| Department B | Sewing | $492,800 | Direct labor hours | 6,400 | $77 per DLH | $308,000 | $184,800 |
| Inspecting | 45,000 | Inspectins | 750 | $60 per inspection | $18,000 | $27,000 | |
| Folding | 86,850 | Units | 28,950 | $3 per unit | $57,900 | $28,950 | |
| Support | Design | $484,000 | Modification orders | 440 | $1,100 per order | $121,000 | $363,000 |
| Providing space | 100,000 | Square feet | 10,000 | $10 per sq ft | $50,000 | $50,000 | |
| Materials handling | 340,300 | Square yards | 830,000 | $0.41 per sq yrd | $200,900 | $139,400 | |
| Total overhead allocated | $1,872,470 | $869,320 | $1,003,150 | ||||
| Units produced | 19,300 | 9,650 | |||||
| Overhead per unit | $45.04 | $103.95 | |||||
| Direct materials and labor per unit | $18.00 | $22.00 | |||||
| Total cost per unit | $63.04 | $125.95 | |||||
| Selling price per unit | $75.00 | $160.00 | |||||
| Profit per unit | $11.96 | $34.05 |
Learn more about this topic:
from
Chapter 7 / Lesson 3Traditional and activity-based costing methods have similarities and differences based on the production methods of a company. Learn about the costs in production and see the comparisons between traditional and activity-based costing systems.