Management Accounting

Problem 1
A. Overhead: Department Rates
Production Departments
Assembly Packaging Total
Overhead $216000 $50400 $720000
Direct labor hours
Deluxe 10000 10000 20000
Regular 150000 10000 160000

Total DL 160000 20000 180000
Machine hours
Deluxe 2000 8000 10000
Regular 8000 72000 80000

Total machine hours 10000 80000 90000

Application rate 216000/160000=$1.35 504000/80000=$6.3 Per DL Per machine hour

Deluxe Regular
Assembly
10000×1.35 $13500
150000×1.35 $202500

Packaging
8000×6.3 50400
72000×6.3 453600 $63900 $656100
Units produced 20000 200000
Overhead per unit $3.195 $3.2805

Prime cost per unit Deluxe $160000/20000=$8 Regular $1500000/200000=$7.5
Per unit cost Deluxe $8+$3.195=$11.195 Regular $7.5+$3.2805=$10.7805
B. Plantwide Rate
Total overhead cost/Total direct labour hours= $720000/180000=$4 Overhead rate
Overhead cost
Deluxe $4×20000=$80000
Regular $4×160000=$640000

Overhead per unit Deluxe $80000/20000=$4 Regular $640000/200000=$3.2
Per unit cost Deluxe $8+$4=$12 Regular $7.5+$3.2=$10.7

C. Activity rate
Setups: $240,000/100 = $2,400
Moves: $120,000/300 = $4 00
Machine hours: $200,000/90,000 = $2.22
Inspection: $160,000/18,000 = $8.89

Overhead cost Deluxe Regular
Setups
2400×60 144000