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Tent Master produces two lines of tents sold to outdoor enthuslasts. The tents are cut to...

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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.

ProcessActivityOverhead CostDriverQuantity
Department APattern alignment$113,280Batches960
Cutting55,440Machine hours13,200
Moving product154,800Moves3,600
$323,520
Department BSewing$492,800Direct labor hours6,400
Inspecting45,000Inspectins750
Folding86,850Units28,950
$624,650
SupportDesign$484,000Modification orders440
Providing space100,000Square feet10,000
Materials handling340,300Square yards830,000
$924,300

Additional production Information on the two lines of tents follows.

Pup TentPop-up Tent
Units produced19,300 units9,650 units
Moves1,200 moves2,400 moves
Batches240 batches720 batches
Number of inspections300 inspections450 inspections
Machine hours8,000 LH5,200 MH
Direct labor hours4,000 DLH2,400 DLH
Modification orders110 modification orders330 modification orders
Space occupied5,000 square feet5,000 square feet
Material required490,000 square yards340,000 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.

ProcessActivityOverhead CostDriverQuantity Overhead rate Allocated to
Pup Tent
Allocated to
Pop-up Tent
Department APattern alignment$113,280Batches960 $118 pre batch $28,320 $84,960
Cutting55,440Machine hours13,200 44.20 per machine hours $33,600 $21,840
Moving product154,800Moves3,600 $43 pre move $51,600 $103,200
Department BSewing$492,800Direct labor hours6,400 $77 per DLH $308,000 $184,800
Inspecting45,000Inspectins750 $60 per inspection $18,000 $27,000
Folding86,850Units28,950 $3 per unit $57,900 $28,950
SupportDesign$484,000Modification orders440 $1,100 per order $121,000 $363,000
Providing space100,000Square feet10,000 $10 per sq ft $50,000 $50,000
Materials handling340,300Square yards830,000 $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:

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Comparing Traditional Costing & Activity-Based Costing

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Chapter 7 / Lesson 3
6.9K

Traditional 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.


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