Accounting – Determine if the overhead allocated to the product

Accounting

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Determine if the overhead allocated to the product relates to a single plantwide overhead rate method, multiple production department factory overhead rate method, or activity- based costing method.

Product A: $210 allocated by number of setups, $325 allocated by number of purchase orders, and $220 allocated by number of engineering hours. Product B: $284 allocated by direct labor in Department Z and $590 allocated by machine hours in Department Y.  Product C: $475 allocated by machine hours. 

To determine selling and administrative expenses to allocate to products, Wake Coffee Co. uses activity-based costing. The company breaks this expense into customer return processing and shipping and handling, with total estimated costs of $6,000 and $7,000, respectively. The company expects to receive 200 returns and prepare 350 special shipments.

a. Calculate the activity rate for customer return processing and shipping and handling.  b. The Deluxe Coffee receives 57 returns and requires 210 special shipments. Determine the amount of selling and administrative expenses related to these activities that will be allocated to the product. 

The total cost of production for the last four quarters for Moore’s Mowers is shown below. Use the high-low method to determine the variable cost per unit and the fixed cost.

                                  Total Cost         Units Produced  Quarter 1                    $51,000                  2,000  Quarter 2                      56,400                  2,300  Quarter 3                      49,200                  1,900  Quarter 4                      53,700                  2,150 

Calculate the variable cost per unit and the fixed cost using the high-low method for the production information given.

                                     Total Cost        Units Produced  August                           $46,800               5,600  September                      58,200               7,500  October                           42,600               4,900  November                       53,880               6,780 

Finnegan’s management is deciding between the absorption costing and variable costing

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method. The company would like to treat the fixed and variable overhead costs the same, as a product cost. Which method should the company use?

Use the information shown to calculate Finnegan’s manufacturing margin, contribution margin, and income from operations. The company uses a variable costing system. Assume that the company sold all units produced.

Sales                                             $890,000  Direct materials                               54,000  Direct labor                                     120,000  Variable overhead                           18,000  Fixed overhead                               23,500  Variable selling and administrative 12,400  Fixed selling and administrative     35,750

Explanation & Answer

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