Using the cost driver data in Table 1, recalculate the cost of goods manufacture
ID: 2557388 • Letter: U
Question
Using the cost driver data in Table 1, recalculate the cost of goods manufactured for each product line. Then, calculate the margins for each product line (use Exhibit 2 as guidance for the margin calculations).
Exhibit 1. Manufacturing Overhead Statistics and Costs Most Recent Accounting Period Machine-Made handmade Total Manufacturing Statistics Number of pairs produced Number of machine hours Number of batches Raw material shipments received Manufacturing Overhead Costs Machine maintenance Machine set up labor Material handling Total 1,000 200 35 1,400 1,000 40 20 400 800 $50,000 115,000 235,000 $400,000 Exhibit 2. Overhead Allocated with Direct Labor Dollars Machine-Made Total $40,000 25,000 30,000 400.,000 $495,000 handmade $35,000 18,000 Direct labor Direct materials Machine depreciation (direct) Manufacturing overhead Cost of goods manufactured $5,000 7,000 25,000 50,000 $87,000 5,000 350.000 $408,000 Full cost per pair Price per pair Margin percent per pair $217.50 $300.00 $408.00 $500.00 27.5% 18.4%Explanation / Answer
Answer
Cost Pool
Overhead Cost (A)
Cost driver
Amount of cost driver (B)
Activity Rate per cost driver (A/B)
Machine Maintenance
$ 50,000.00
machine hours
1000
$ 50.00
Machine Set Up Labor
$ 1,15,000.00
no. of batches
40
$ 2,875.00
Material handling
$ 2,35,000.00
shipment
20
$ 11,750.00
TOTAL
$ 4,00,000.00
Machine made
Handmade
Cost Pool
Overhead Cost (A)
Activity Rate
No. of cost driver
Cost allocated
No. of cost driver
Cost allocated
Machine Maintenance
$ 50,000.00
$ 50.00
800
$ 40,000.00
200
$ 10,000.00
Machine Set Up Labor
$ 1,15,000.00
$ 2,875.00
5
$ 14,375.00
35
$ 1,00,625.00
Material handling
$ 2,35,000.00
$ 11,750.00
2
$ 23,500.00
18
$ 2,11,500.00
TOTAL
$ 4,00,000.00
$ 77,875.00
$ 3,22,125.00
Machine made
Handmade
TOTAL
Direct Labor
$ 5,000.00
$ 35,000.00
$ 40,000.00
Direct materials
$ 7,000.00
$ 18,000.00
$ 25,000.00
Machine depreciation (direct)
$ 25,000.00
$ 5,000.00
$ 30,000.00
Manufacturing Overhead
$ 77,875.00
$ 3,22,125.00
$ 4,00,000.00
Cost of Goods manufactured
$ 1,14,875.00
$ 3,80,125.00
$ 4,95,000.00
pairs
400
1000
Machine made
Handmade
Full Cost per pair
$ 287.19
$ 380.13
Price per pair
$ 300.00
$ 500.00
Margin percent per pair
95.7%
76.0%
Cost Pool
Overhead Cost (A)
Cost driver
Amount of cost driver (B)
Activity Rate per cost driver (A/B)
Machine Maintenance
$ 50,000.00
machine hours
1000
$ 50.00
Machine Set Up Labor
$ 1,15,000.00
no. of batches
40
$ 2,875.00
Material handling
$ 2,35,000.00
shipment
20
$ 11,750.00
TOTAL
$ 4,00,000.00
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