Question

# Flawless Cosmetic Company manufactures and distributes several different products. The company currently uses a plantwide allocation...

Flawless Cosmetic Company manufactures and distributes several different products. The company currently uses a plantwide allocation method for allocating overhead at a rate of \$8 per direct labor hour. Loren is the department manager of the Makeup Department that produces Products – Concealer (C) and Glow Cream (GC). Jennifer is the department manager of the Hair Care Department that manufactures Product – Shampoo (S). The product costs (per case of 24 bottles) and other information are as follows:

 Products C GC S Direct materials \$ 105.00 \$ 68.00 \$ 50.00 Direct labor 40.00 30.50 13.00 Overhead 26.00 24.00 12.00 \$ 171.00 \$ 122.50 \$ 75.00 Machine hours 5 3 4 Number of cases (per year) 300 500 600

If Flawless changes its allocation basis to machine hours, what is the total product cost per case for Product GC?

 Total product cost per case for Product GC 113.50 Workings: C GC S Total Number of cases (per year) 300 500 600 X Overhead per case 26 24 12 Total overhead 7800 12000 7200 27000 C GC S Total Number of cases (per year) 300 500 600 X Machine hours 5 3 4 Total Machine hours 1500 1500 2400 5400 Overhead rate per Machine hour 5.00 =27000/5400 Product GC: Direct materials 68.00 Direct labor 30.50 Overhead 15.00 =5.00*3 Total product cost per case for Product GC 113.50