Hi I have an exercise and I want to you to solve it step by step, please . . I f
ID: 2546140 • Letter: H
Question
Hi I have an exercise and I want to you to solve it step by step, please.. I found the solution here but it did not have steps ..
*Answer the following questions using the information below: Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTS SWEATSHIRTS Production and sales volume 60,000 units 35,000 units Selling price $16.00 $29.00 Direct material $ 2.00 $ 5.00 Direct labor $ 4.50 $ 7.20 Manufacturing overhead $ 2.00 $ 3.00 Gross profit $ 7.50 $13.80 Selling and administrative $ 4.00 $ 7.00 Operating profit $ 3.50 $ 6.80 What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of Sweatshirts increase to $8.20 per unit? 1) Under the revised ABC system, the activity-cost driver rate for the supervision activity is ________. 2) Under the revised ABC system, supervision costs allocated to Sweatshirts will be ________. 3) Under the revised ABC system, total overhead costs allocated to Sweatshirts will be ________. 4) Under the revised ABC system, overhead costs per unit for the Sweatshirts will be ________. 5) Using an ABC system, next year's estimates show manufacturing overhead costs will total $228,300 for 52,000 T-shirts. If all other T-shirt costs and sales prices remain the same, the profitability that can be expected is ________.
Explanation / Answer
Answer:
We have been provided with the infomration as under
T-SHIRTS
SWEATSHIRTS
Production and sales volume
60,000 units
35,000 units
Selling price
$16.00
$29.00
Direct material
$2.00
$5.00
Direct labor
$4.50
$7.20
Manufacturing overhead
$2.00
$3.00
Gross profit
$7.50
$13.80
Selling and administrative
$4.00
$7.00
Operating profit
$3.50
$6.80
1) As per ABC system, the activity-cost driver rate for the supervision activity is _$1.16 per dlh
Working
rate for the supervision activity
=$100,920 / (45,000 dlh + 42,000 dlh)
= $1.16 per dlh
___________________________________________________________
2) Under the revised ABC system, supervision costs allocated to Sweatshirts will be __$48720_____.
Working
$100,920 / (45,000 dlh + 42,000 dlh)
= $1.16 per dlh × 42,000 dlh
= $48,720
________________________________________________________________
3) Under the revised ABC system, total overhead costs allocated to Sweatshirts will be __$76,720__.
Working
$124,000 / (60,000 inspections + 17,500 inspections)
= $1.60 per inspection × 17,500
= $28,000
Add:
$100,920 / (45,000 dlh + 42,000 dlh)
= $1.16 per dlh × 42,000 dlh
= $48,720;
So total is
$28,000 + $48,720
= $76,720
________________________________________________________________
4) Under the revised ABC system, overhead costs per unit for the Sweatshirts will be ___$2.19_____.
Working
$76,720 / 35,000 sweatshirts
= $2.19
___________________________________________________________________
5) Using an ABC system, next year's estimates show manufacturing overhead costs will total $228,300 for 52,000 T-shirts. If all other T-shirt costs and sales prices remain the same, the profitability that can be expected is ___$1.11_____.
Working
[52,000 ($16 - $2.00 - $4.50 - $4.00)] - $228,300
= $57,700 / 52,000
= $1.11
T-SHIRTS
SWEATSHIRTS
Production and sales volume
60,000 units
35,000 units
Selling price
$16.00
$29.00
Direct material
$2.00
$5.00
Direct labor
$4.50
$7.20
Manufacturing overhead
$2.00
$3.00
Gross profit
$7.50
$13.80
Selling and administrative
$4.00
$7.00
Operating profit
$3.50
$6.80