Milsaps Company produces sportsmen’s digital scales. In preparing the current bu
ID: 2418074 • Letter: M
Question
Milsaps Company produces sportsmen’s digital scales. In preparing the current budget, Milsaps’ controller estimates a total of $290,000 in direct materials cost, $240,000 in direct labor cost, and $304,800 in manufacturing overhead costs. Since much of the production process requires skilled workers to assemble the scales, direct labor cost is used as the overhead application base. At the end of the period, Milsaps reported actual results as follows: direct materials cost of $289,000, direct labor cost of $208,000, and manufacturing overhead cost $259,490.
What is Milsaps’ predetermined overhead rate for the year?
A manufacturer of potting soil has the following financial data:
Pounds produced and sold
23,900
Sales
$189,800
Less: Variable manufacturing costs
121,000
Fixed manufacturing costs
10,000
Variable selling and administrative costs
30,900
Fixed selling and administrative costs
15,900
Net operating income
$12,000
What is the company’s unit contribution margin?
Activity
Activity overhead $
Cost driver
Cost driver quantity
Machine setup
$212,960
# of setups
880
Inspection
171,000
# of quality tests
450
Materials receiving
180,250
# of purchase orders
1,750
The budgeted data for smart phone case production are as follows.
Direct materials
$2.80
per unit
Direct labor
$0.55
per unit
Number of setups
87
Number of quality tests
402
Number of purchase orders
58
Production
18,720
units
Calculate the activity rate for each cost pool.
Machine setup
$ per setup
Inspection
$ per test
Materials receiving
$ per PO
Stockin Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.
Activity Pool
Department Costs
Cost driver
Binding
$275,835.00
Number of units
Printing
789,929.00
Machine hours
Product design
200,988.00
Change orders
General
805,948.00
None
Total overhead costs
$2,072,700.00
Other information is as follows:
Tablets
Books
Units
77,700
19,425
Direct materials cost per unit
$4.00
$12.00
Direct labor cost per unit
$5.00
$10.00
Direct labor hours
32,900
16,450
Machine hours
137,200
102,900
Change orders
1,861
3,722
Determine the unit product cost for Tablets using the traditional costing system
Pounds produced and sold
23,900
Sales
$189,800
Less: Variable manufacturing costs
121,000
Fixed manufacturing costs
10,000
Variable selling and administrative costs
30,900
Fixed selling and administrative costs
15,900
Net operating income
$12,000
Explanation / Answer
1)Predetermined overhead rate = estimated overhead/estimated activity driver
= 304800 / 240000
= 1.27 or 127% of direct labor cost.
2)Unit contribution margin = (sales -variable cost) /unit
= (189800-121000-30900)/23900
= 37900 / 23900
= $ 1.59 per unit
3)
4)overhead cost per direct labor nhour = 2072700/ (32900+16450)
= 2072700/49350
= $ 42 per DLH
Total overhead allocated to tablet = 32900 *42 =1381800
Unit overhead cost =1381800/77700 = 17.78
Unit product cost = 4+5+17.78 = $ 26.78 per unit
Activity cost per activity Machine set up 212960/880 $ 242 per set up Inspection 171000/450 $ 380 per test material receiving 180250/1750 $ 103 per PO