Mobile Safes Walk-In Safes (a) Perdon Corporation manufactures safes—large mobil
ID: 2455778 • Letter: M
Question
Mobile
Safes
Walk-In
Safes
(a)
Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.Mobile
Safes
Walk-In
Safes
Explanation / Answer
Total Labour hours for mobile safe= 800 Hours*200Units=160,000 Hours
Total Labour hours for Walk-in safe=1690Hours*50Units=84,500 Hours
Total Manufacturing Overhead= $272,200
Manufacturing Overhead allocated per unit
Mobile Safe
= $272,200* {$160000/($160000+$84500)}
=$177,995.91
Per unit allocated overhead= $177995.91/200=$889.98
Walk-in Safe
= $272,200* {$84500/($160000+$84500)}
=$94004.09
Per unit allocated overhead= $94004.09/50=$1880.08