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CHAPTER SIX
Problem 6-39: Two stage allocation and product costing
Data on operations and costs for October follow:
Units Baseball caps T-shirts Total
Units produced 10,000 5,000 15,000
Direct labor hours 200 120 320
Machine Hours 1,000 800 1,800
Costs
Direct Material $12,000 $8,000 $20,000
Direct labor $4,000 $2,400 $6,400
Manufacturing OH $22,200
The analysis of overhead accounts by the cost accountant follow:-
Account Amount Related
Utilities $4000 Machine hours
Machine depreciation and maintenance 8800 Machine hours
Miscellaneous 3400 Machine hours
Total Machine hours related $ 16,200
Supplies $2800
Purchasing and storing materials 3200
total material related $6000
Required
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a. Compute the predetermined overhead rates assuming that Mets Products uses machine
hours to allocated machine related overhead costs and material costs to allocated material
related overhead costs
b. Compute the total costs of productions and cost per unit for each of the two products for
October.
A. Compute the predetermined overhead rates assuming that Mets Products uses machine
hours to allocated machine related overhead costs and material costs to allocated material
related overhead costs
Cost pool Over head : $22,200
Intermediate cost pools Material related : $ $6000 Machine related : $ 16,200
Cost allocation rule Direct material costs Machine hours
Intermediate cost pools Material related : $ $6000 Machine related : $ 16,200
Cost allocation rule Direct material costs 30 % Machine hours : $ 9
($6,000 / $20,000) =$16,200 / 1800 MHS
Cost objects Baseball T-shirts
DMC= $3,600 ($12000 * $2400 ($8,000 * 30 %)
30 %)
MH= $9,000 ( 1000 hrs $9) $7,200 ( 800 hrs $9)
Allocated overhead $12,600 $9,600
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B. Compute the total costs of productions and cost per unit for each of the two
products for October.
Units Baseball caps T-shirts Total
Units produced 10,000 5,000 15,000
Direct labor hours 200 120 320
Machine Hours 1,000 800 1,800
Costs
Direct Material $12,000 $8,000 $20,000
Direct labor $4,000 $2,400 $6,400
OH @ 30% DMC $3,600 $2400 $6,000
OH @ $9/MH $9,000 $7,200 $16,200
Total MOH 12,600 $9,600 $22,200
Total $28,600 $20,000 $48,600
Cost per unit $2.86 $4
P6-40: Two stage allocation and product costing
Data on operations and costs for October follow:
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Units Hospital Patients Other Patients Total
Units produced 640 860 1,500
Direct labor hours 480 180 660
Equipment Hours Used 240 120 360
Costs
Direct labor $38,400 $10,800 $49,200
Manufacturing OH $49,560
The analysis of overhead accounts by the cost accountant as follows:-
Account Amount Related
Utilities $4,800 Equipment hours
Equipment depreciation and maintenance 8400 Equipment hours
Miscellaneous 3360 Equipment hours
Total Equipment hours related $ 16,560
Supplies $12,600
Indirect labor and supervision 20,400
Total labor hours related $33000
Required
a. Compute the predetermined overhead rates assuming that Owl-Eye uses equipment
hours to allocated equipment e related overhead costs and l costs direct hours to
allocated labor related overhead costs
b. Compute the total costs of productions and cost per unit for each of the two patients
on June
A .Compute the predetermined overhead rates assuming that Owl-Eye uses equipment
hours to allocated equipment e related overhead costs and l costs direct hours to allocated
labor related overhead costs
Cost pool Over head : $$49,56
Intermediate cost pools Labor related : $ 33000 Equipment related : $ 16,560
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Cost allocation rule Direct labor costs equipment hours
Intermediate cost pools Labor related : $ $$33000 Equipment related : $ 16,560
Cost allocation rule Direct labor costs 30 % Machine hours : $ 9
($33000 / $38400) =$16,200 / 1800 MHS
Cost objects Baseball T-shirts
DMC= $3,600 ($12000 * $2400 ($8,000 * 30 %)
30 %)
MH= $9,000 ( 1000 hrs $9) $7,200 ( 800 hrs $9)
Allocated overhead $12,600 $9,600
P6-41
Fin X Sci- X Total
Number of units 10,000 40,000 50,000
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Parts costs per unit $20 $25
Costs 200,000 1,000,000
Total operation costs 30,000 120,000
Total cost 230,000 1,120,000
Number of Units 10,000 40,000
Unit cost $23 $28
Computation of total operation costs
Total direct material $62,000
Total direct labor 17500
Total overhead 70500
Total operation cost $150,000
Number of units assembled 50,000
Operation cost per unit $3
Total operation costs
Number of units assembled 10,000 40,000
Operation cost per unit $3 $3
Total operation costs $30,000 $120,000
P6-42-b
Computation of overhead costs by overhead cost pool
Manufacturing overhead Machine hour Labor cost related Total
related
Utilities $1800 0 $1800
Supplies 0 $5000 5000
Training 0 10000 10000
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Supervision 0 25800 25800
Machine deprecation 32000 0 32000
Plant deprecation 14200 0 14200
Miscellaneous 0 85,300 85,300
Totals $48,000 $126,100 $174100
Computation of machine hour pool rate
Total estimate of overhead $48,000
Estimate of machine hours 6000
Overhead rate per machine hour $8
Computation of machine hour pool rate
Total estimate of overhead $126,100
Estimate of direct labor costs 100,000
Overhead rate as a percentage of 126.1%
labor costs
Computation of product costs
Basic Dominator Total
Direct material $ 10,000 $ 3,750 $ 13,750
Direct labor 64,500 35,500 100,000
Overhead :
Machine related 32,000 16,000 48,000
Labor related 81,335 44,766 126,100
Total overhead $113,335 $60,766 $174,101
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Total cost $ 461,951
Units produced 1,000 250 $369.56
Units cost
