3. Gorden Company produces a variety of electronic products. One of its plants p
ID: 2339805 • Letter: 3
Question
3. Gorden Company produces a variety of electronic products. One of its plants produces two laser printers, Speedy and Deluxe. At the beginning of 2014, the following data were prepared for this plant: Deluxe Speedy 50,000 400,000 475.00 $300.00 180.00 S110.00 Unit overhead cost $20.00 S153.60 Selli Unit cost The unit overhead cost is calculated using the predetermined overhead application rate based on direct labor-hours. Upon examining the data, the marketing manager was particularly impressed with the per-unit profitability of the Deluxe printer and suggested that more emphasis be placed on producing and selling this product. The plant supervisor objected to this strategy, arguing that the Deluxe model required a very delicate manufacturing process. The supervisor believed that the cost of the Deluxe printer was likely to be much higher that reported. The controller suggests an ABC system and provides the following budget data pertaining to the period: Activity Consumption Cost Driver Pool Rate Deluxe Speedy $2,800 Overhead Activit Setups Machine costs Engineering Packi Cost per unit of cost driver Number of Machine-hours 200 100 Engineering-hours Packing orders 00 100,000 400,000 40 45,000 120,000 20 50,000 200,000 Required . Using the projected data based on the firm's current costing system, calculate gross profit 2. Using the suggested multiple cost drivers overhead rates, calculate the overhead cost per 3. Based on your results, evaluate the suggestion of the marketing manager to emphasize the per unit and gross profit percentage (with respect to selling price) for each product. unit for each product and determine gross profit per unit and gross profit percentage (with respect to selling price) for each product. Deluxe model.Explanation / Answer
1-
Deluxe
Speedy
Selling price per unit
475
300
less cost of goods sold
prime cost + unit overhead cost
200
263.6
gross profit
275
36.4
Gross profit % = gross profit/selling price
57.89%
12.13%
2-
Sales
475
300
less cost of goods sold
447.2
232.7
prime cost
180
110
total overhead cost
267.2
122.7
gross profit
27.8
67.3
Gross profit % = gross profit/selling price
5.85%
22.43%
total Overhead cost
Deluxe
Speedy
set up = pool rate*activity product wise
560000
280000
Machine cost = pool cost*activity
10000000
40000000
Engineering hours = pool rate*hours assigned to product
1800000
4800000
packing = pool rate*no of orders assigned to products
1000000
4000000
total overhead cost assigned
13360000
49080000
no of units produced
50000
400000
total ovehead cost per unit = total overhead cost/ no of units
267.2
122.7
No emphasis should not be on Deluxe product
1-
Deluxe
Speedy
Selling price per unit
475
300
less cost of goods sold
prime cost + unit overhead cost
200
263.6
gross profit
275
36.4
Gross profit % = gross profit/selling price
57.89%
12.13%
2-
Sales
475
300
less cost of goods sold
447.2
232.7
prime cost
180
110
total overhead cost
267.2
122.7
gross profit
27.8
67.3
Gross profit % = gross profit/selling price
5.85%
22.43%
total Overhead cost
Deluxe
Speedy
set up = pool rate*activity product wise
560000
280000
Machine cost = pool cost*activity
10000000
40000000
Engineering hours = pool rate*hours assigned to product
1800000
4800000
packing = pool rate*no of orders assigned to products
1000000
4000000
total overhead cost assigned
13360000
49080000
no of units produced
50000
400000
total ovehead cost per unit = total overhead cost/ no of units
267.2
122.7
No emphasis should not be on Deluxe product
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