Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leat
her briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs:
Setting up equipment $ 5,000
Machining 20,000
The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production.
Elegant Fina
Direct labor $9,000 $3,000
Direct materials $3,000 $3,000
Units 3,000 3,000
Machine hours 500 4,500
Setup hours 100 100
Required:
1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain.
2. Calculate the consumption ratios for each activity. Round your answers to one decimal place.
Elegant Fina
Machining
Setups
3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent. (Note: Do not round intermediate calculations.)
Elegant $ per briefcase
Fina $ per briefcase
3b. Based on your calculations above which of the following statements is correct?
4. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round your answers to the nearest cent.
Elegant $ per unit
Fina $ per unit
Setting up equipment $ 5,000
Machining 20,000
The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production.
Elegant Fina
Direct labor $9,000 $3,000
Direct materials $3,000 $3,000
Units 3,000 3,000
Machine hours 500 4,500
Setup hours 100 100
Required:
1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain.
2. Calculate the consumption ratios for each activity. Round your answers to one decimal place.
Elegant Fina
Machining
Setups
3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent. (Note: Do not round intermediate calculations.)
Elegant $ per briefcase
Fina $ per briefcase
3b. Based on your calculations above which of the following statements is correct?
4. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round your answers to the nearest cent.
Elegant $ per unit
Fina $ per unit
2 answers:
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