Tiger Furnishings’s CFO believes that a two-stage cost allocation system would g

Question

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.

Compute the product costs per unit assuming that Tiger Furnishings uses direct labor costs and machine-hours to allocate overhead to the products. (Do not round the direct-labor cost rate in your intermediate calculations. Round your answers to two decimal places.)

Basic Dominator Total   Units produced 1,400 310 1,710   Machine-hours 3,200 3,300 6,500   Direct labor-hours 2,500 3,300 5,800   Direct materials costs $ 19,000 $ 4,950 $ 23,950   Direct labor costs 64,000 41,000 105,000   Manufacturing overhead costs 191,955        Total costs $ 320,905

Explanation / Answer

Solution:

Machine Hour cost allocation Total cost Utilities 1,500 Machine Depreciation 28,000 Plant Depreciation 29,000 Total cost 58,500 Total machine hours 6,500 Per machine hour overhead 9 Direct labor Basis Supplies 5,000 Training 10,000 Supervision 21,800 Miscellaneous 96,655 Total cost 133,455 Total Direct Labor hours 5,800 Per direcr labor hour overhead 23.01

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