Question

Use below information for Questions 14 to 15:

Company X produces dining chairs and tables. The following budget information is available:

Item                                   Dining Chairs                    Tables                                Total Cost

Machine Setups                             250                       600                                     TL48,100            

Inspections                                      250                       470                                    TL72,000                           

Labor hours                                     2,100                   2,410

Q-14) Compute total machine setups and inspection costs assigned to Dining Chairs, using plantwide method if the allocation base is labor hours.

Q-15) Compute total machine setups and inspection costs assigned to Tables, using ABC.

Q-16) A company has a unit contribution margin of $125 and a contribution margin ratio of 41%. What is the unit selling price?

Answer 1

14) Single overhead rate = 48,100 + 72000 /(2100 + 2410) hours	$        26.63	Per direct labour hour
Dining chairs: = 2100 DL hours x $26.63	$ 55,922.39
15)
Activity-based costing
Machine setups: $48,100 ÷ 850 =	$        56.59	per setup
Inspections: $72,000 ÷ 720 =	$      100.00	per inspection
Tables: (600 × $56.59) + (470 × $100) =	$ 80,952.94
16)
CM = sales - variable cost = 125
CM ratio  = sales/ CM
41% = Sales/$125
Sales = $125 x 41%	$        51.25	per unit