Question

Use the following statement:

Product A | Product B | Total | |

sales volume (units) | 100 | 180 | 280 |

Revenue | $12,000 | $72,000 | $84,000 |

COGS: | |||

direct materials | $2,400 | $4,800 | $7,200 |

direct labor | $4,800 | $12,000 | $16,800 |

MOH | $50,400 | ||

Gross margin | $9,600 |

*Required:*

(a) allocate the shared MOH ($50,400) among product A and product
B, using direct labor dollars as the allocation base.

overhead rate=$ per DL$

MOH allocated to A=$

MOH allocated to B=$

(b) using the allocated costs from (a), compute the gross margin
for product A and product B.

*If you get a negative number, enter it with a minus sign, i.e.,
enter negative $1000 as -1000, not as ($1000)*

gross margin for A=$

gross margin for B=$

(c) allocate the shared MOH ($50,400) among product A and product
B, using the number of units as the allocation base.

overhead rate=$ per unit

MOH allocated to A=$

MOH allocated to B=$

(d) using the allocated costs from (c), compute the gross margin
for product A and product B.

*If you get a negative number, enter it with a minus sign, i.e.,
enter negative $1000 as -1000, not as ($1000)*

gross margin for A=$

gross margin for B=$

Answer #1

a) overhead rate per DL$ = total overhead / total direct labour

= 50,400 / 16,800

= 3 per DL$

allocated to A = 4,800 x 3 = $14,400

allocated to B = 12,000 x 3 = $36,000

b) gross margin of A = sale - material - labor - MOH

= 12,000 - 2,400 - 4,800 -14,400

= -9,600

gross margin of B = sale - material - labor - MOH

= 72,000 - 4,800- 12,000 -36,000

= 19,200

c) overhead rate per unit = total overhead / total unit

= 50,400 / 280

= 180 per unit

allocated to A = 100 x 180 = 18,000

allocated to B = 180 x 180 = 32,400

d) gross margin of A = sale - material - labor - MOH

= 12,000 - 2,400 - 4,800 -18,000

= -13,200

gross margin of B = sale - material - labor - MOH

= 72,000 - 4,800- 12,000 -32,400

= 22,800

Question 1: Cost allocation
Product A
Product B
Total
sales volume (units)
180
100
280
Revenue
$1,000
$6,000
$7,000
Variable costs:
direct
materials
$200
$400
$600
direct labor
$400
$1,000
$1,400
Contribution margin
$400
$4,600
$5,000
Fixed costs
$4,200
Profit
$800
a) Allocate the fixed costs between products A and B. Use
direct labor dollars as the cost driver.
allocation rate=$ per DL$
allocated costs for A=$
allocated costs for B=$
b) Compute the profit margins for products A and
B:...

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Product B
Total
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360
200
560
Revenue
$4,000
$24,000
$28,000
Variable costs:
direct materials
$800
$1,600
$2,400
direct labor
$1,600
$4,000
$5,600
Contribution margin
$1,600
$18,400
$20,000
Fixed costs
$16,800
Profit
$3,200
a) Allocate the fixed costs between products A and B. Use
direct labor dollars as the cost driver.
allocation rate=$ per ___________ DL$
allocated costs for A=$ __________
allocated costs for B=$ ___________
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$ Unfavorable

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negative number using a minus sign and an unfavorable variance as a
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$_________

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Enter a favorable variance as a negative number using a minus sign
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_____
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activities—production setup, material handling, and general factory
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the following estimated costs and activity bases for these
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Activity
Cost
Activity Base
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$250,000
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activities—production setup, materials handling, and general
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the following estimated costs and activity bases for these
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Activity Base
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Number of setups
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Number of parts
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Number of direct labor hours
Each product's total activity in each of the...

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During June, 4,400 units of this product were produced using
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23-2
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