Scenario IV: Goodmark Company produces two types of birthday cards: scented and
ID: 2562157 • Letter: S
Question
Scenario IV: Goodmark Company produces two types of birthday cards: scented and regular. Expected product data for the coming year are given below. Overhead costs are identified by activity.
Overhead costs:
Required:
$
only answer number 3
Scenario III: Goodmark Company produces two types of birthday cards: scented and regular. During the year, 20,000 scented cards and 200,000 regular cards were produced. Goodmark has two production departments: Cutting and Printing. Direct labor hours are used to assign the overhead of Cutting and machine hours are used for Printing. The data for the two producing departments are given below:
Required:
Scented Cards Regular Cards Total Units produced 20,000 200,000 - Prime costs $160,000 $1,500,000 $1,660,000 Direct labor hours 20,000 160,000 180,000 Number of setups 60 40 100 Machine hours 10,000 80,000 90,000 Inspection hours 2,000 16,000 18,000 Number of moves 180 120 300Explanation / Answer
Scenario IV. Answer 1-a. Scented Regular Consumtion Ratios Setups 0.6000 0.4000 (60 /100) (40 / 100) Moving Material 0.6000 0.4000 (180 /300) (120 / 300) Machining 0.1111 0.8889 (10,000 / 90,000) (80,000 / 90,000) Inspection 0.1111 0.8889 (2,000 / 18,000) (16,000 / 18,000) Answer 1-b. If One Rate is used Scented Overhead will Receive = 20,000 / 180,000 = 0.1111 of Total Overhead. Upon comparing this overhead assignment with the activity consumption ratios calculated in part a, it is clear that a plantwide rate would significantly understate the activity-based cost assignments. Answer 2. Activity Overhead Cost Driver Quantity Activity Rate Setups 240,000 100 Setups 2,400.00 per Setup Moving Material 120,000 300 moves 400.00 per move Machining 200,000 90,000 mach Hrs 2.22 per mach hr Inspection 160,000 18,000 inspections hrs 8.89 per inspection hr Total 720,000 Assigning Overhead Cost to Product Using ABC Method Activity Based Overhead Rate Scented Regular Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Setups 2,400.00 per Setup 60 Setups 144,000 40 Setups 96,000 Moving Material 400.00 per move 180 moves 72,000 120 moves 48,000 Machining 2.22 per mach hr 10,000 mach Hrs 22,222 80,000 mach Hrs 177,778 Inspection 8.89 per inspection hr 2,000 inspections hrs 17,778 16,000 inspections hrs 142,222 Total Overhead Cost 256,000 464,000 Scented Regular Prime Costs 160,000 1,500,000 Overhead Costs 256,000 464,000 Total 416,000 1,964,000 No. of Units Produced 20,000 200,000 Cost Per Unit 20.80 9.82 Scenerio III Answer 1. Predetermined Overhead Rate - Cutting = $216,000 (Total Overhead) / 160,000 DLH Predetermined Overhead Rate - Cutting = $1.35 per DLH Predetermined Overhead Rate - Printing = $504,000 (Total Overhead) / 80,000 Mach Hrs Predetermined Overhead Rate - Printing = $6.30 per Mach Hrs Answer 2. Scented Regular Overhead Allocated Cutting 13,500.00 202,500.00 ($1.35 X 10,000 DLH) ($1.35 X 150,000 DLH) Printing 50,400.00 453,600.00 ($6.30 X 8,000 Mach Hrs) ($6.30 X 72,000 Mach Hrs) Total Overhead 63,900.00 656,100.00 No. of Units produced 20,000 200,000 Overhead per unit 3.20 3.28
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