Product A Product B Product C Product D Total Volume (units) 10,000 8,000 6,000
ID: 2434030 • Letter: P
Question
Product A
Product B
Product C
Product D
Total
Volume (units)
10,000
8,000
6,000
4,000
Selling Price
$15
$18
$20
$22
Materials/Unit
$4
$5
$6
$7
Direct Labor Hours(DLH)/Unit
0.24
0.18
0.12
0.08
TotalDLH
2,400
1,440
720
320
4,880
Plant Overhead
$122,000
Direct labor rate/hour
$30
C) Applythe new overhead rate to allocate overhead to the remainingproducts, and re-calculate theirprofitability.
Product A
Product B
Product C
Product D
Total
Volume (units)
10,000
8,000
6,000
4,000
Selling Price
$15
$18
$20
$22
Materials/Unit
$4
$5
$6
$7
Direct Labor Hours(DLH)/Unit
0.24
0.18
0.12
0.08
TotalDLH
2,400
1,440
720
320
4,880
Explanation / Answer
To calculate the materials cost, you need to times thematerials/unit with units sold. A B C D Revenue 150,000 144,000 120,000 88,000 Materials Cost 40,000 40,000 36,000 28,000 Direct Labor (DLH*$30) 72,000 43,200 21,600 9,600 Overhead (DLH*$25) 60,000 36,000 18,000 8,000 Net Income (22,000) 24,800 44,400 42,400 B) Now product A is unprofitable, so remove product A Total DHL = 1,440+720+320 = 2,480 hours OH = $122,000 OH rate = 122,000/(2480*30) = 163.98% of DL cost C) B C D Revenue 144,000 120,000 88,000 MaterialsCost 40,000 36,000 28,000 Direct Labor (DLH*$30) 43,200 21,600 9,600 Overhead (163.98% DL) 70,839 35,419 15,742 NetIncome (10,039) 26,981 34,658
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