Question

Tiger Furnishings produces two models of cabinets for home theater components, the Basic and the Dominator. Data on operations and costs for March follow:

	Basic			Dominator			Total
Units produced		1,100			500			1,600
Machine-hours		3,400			2,600			6,000
Direct labor-hours		2,500			3,800			6,300
Direct materials costs	$	20,000		$	4,050		$	24,050
Direct labor costs		64,000			56,000			120,000
Manufacturing overhead costs								206,280
Total costs							$	350,330

Tiger Furnishings’s CFO believes that a two-stage cost allocation system would give managers better cost information. She asks the company’s cost accountant to analyze the accounts and assign overhead costs to two pools: overhead related to direct labor cost and overhead related to machine-hours.

The analysis of overhead accounts by the cost accountant follows:

Manufacturing Overhead	Overhead Estimate		Cost Pool Assignment
Utilities	$	1,700	Machine-hour related
Supplies		4,200	Direct labor cost related
Training		8,400	Direct labor cost related
Supervision		22,800	Direct labor cost related
Machine depreciation		31,000	Machine-hour related
Plant depreciation		21,300	Machine-hour related
Miscellaneous		116,880	Direct labor cost related

Required: Compute the product costs per unit assuming that Tiger Furnishings uses direct labor costs and machine-hours to allocate overhead to the products.

	Basic	Dominator	Total
Product Costing	-	-	-
Direct Material
Direct Labor
Overhead
Machine-related
Labor-related
Total overhead
Total Cost
Units produced
Unit cost

Answer 1

Solution:

Computation of Overhead rate - Tiger Furnishings
Particulars	Direct labor cost related overhead	Machine hour related overhead
Total overhead cost	$152,280.00	$54,000.00
Direct labor cost	$120,000.00
Machine hours		6000
Overhead rate	1.269	$9.00

Computation of product cost per unit - Tiger Furnishings
Particulars	Basic	Dominator
Direct material costs	$20,000.00	$4,050.00
Direct labor cost	$64,000.00	$56,000.00
Manufactuirng overhead cost:
Direct labor related	$81,216.00	$71,064.00
Machine hour related	$30,600.00	$23,400.00
Total Manufacturing cost	$195,816.00	$154,514.00
Nos of units	1100	500
Product cost per unit	$178.01	$309.03