Problem 6-53 Account Analysis, Two-Stage Allocation, and Product Costing (LO 6-2
ID: 2516062 • Letter: P
Question
Problem 6-53 Account Analysis, Two-Stage Allocation, and Product Costing (LO 6-2, 4, 5) Tiger Furnishings produces two models of cabinets for home theater components, the Basic and the Dominator Data on operations and costs for March follow: Dominator Total Basic 1,120 3,700 2,200 440 Units produced Machine-hours Direct labor-hours Direct materials costs Direct labor costs Manufacturing overhead costs 1,560 6,500 5,600 $17,000 5,350 $ 22,350 105,000 192,480 $319,830 2,800 3,400 62,000 43,000 Total costs 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-hoursExplanation / Answer
A)
Compute the product costs per unit assuming that Tiger Furnishings uses direct labor costs to allocate overhead to the products.
Particulars Basic Dominator Total
Direct materials 10,000 3,750 13,750
Direct labor 64,500 35,500 100,000
MOH at (175,000 / 100,000) = 1.75 PLH 112875 62,125 175,000
Total 187,375 101,375 288,750
Unit Produced 1,000 250 1,250
Per unit cost 187 406 593
Per unit cost of basic model = $187 per unit
Per unit cost of Dominator model = $406 per unit.
B)
.Compute the product costs per unit assuming that Tiger Furnishings uses machine-hours costs to allocate overhead to the products.
Particulars Basic Dominator Total
Direct materials 10,000 3,750 13,750
Direct labor 64,500 35,500 100,000
MOH at (175,000 / 7,000) = 25 112,500 62,500 175,000
Total 187,000 101,750 288,750
Unit Produced 1,000 250 1,250
Per unit cost 187 407 594
Per unit cost of basic model = $187 per unit
Per unit cost of Dominator model = $407 per unit.