What is the minimum price that the company should set per bottle of SlimLife

Managerial Accounting 1B

Financial and Managerial Accounting

Chapter 17

 

Exercise 17-6 Plantwide overhead rate L.O. P1

[The following information applies to the questions displayed below.]

Textra Polymers produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2011 follow.

 

  Molding Trimming
  Direct labor hours     52,000  DLH       48,000  DLH  
  Machine hours     30,500  MH       3,600  MH  
  Overhead costs   $ 730,000       $ 590,000    

 

Data for two special order parts to be manufactured by the company in 2011 follow:

 

  Part A27C Part X82B
  Number of units   9,800  units     54,500  units  
  Machine hours                
     Molding   5,100  MH     1,020  MH  
     Trimming   2,600  MH     650  MH  
  Direct labor hours                
     Molding 5,500  DLH 2,150  DLH
     Trimming 700  DLH 3,500  DLH

 

 

1.Exercise 17-6 Part 1

Required
1. Compute the plantwide overhead rate using direct labor hours as the base. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

 

  Plantwide overhead rate

rev: 03-04-11

2.

Exercise 17-6 Part 2

2. Determine the overhead cost assigned to each product line using the plantwide rate computed in part 1.(Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)

 

Product Overhead cost
  Part A27C  
  Part X82B  

 

 

3.

Exercise 17-7 Departmental overhead rates L.O. P2

Textra Polymers produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2011 follow.

 

  Molding Trimming
  Direct labor hours     52,000  DLH       48,000  DLH  
  Machine hours     30,500  MH       3,600  MH  
  Overhead costs   $ 730,000       $ 590,000    

 

Data for two special order parts to be manufactured by the company in 2011 follow:

 

  Part A27C Part X82B
  Number of units   9,800  units     54,500  units  
  Machine hours                
     Molding   5,100  MH     1,020  MH  
     Trimming   2,600  MH     650  MH  
  Direct labor hours                
     Molding   5,500  DLH     2,150  DLH  
     Trimming   700  DLH     3,500  DLH  

 

Required
1. Compute a departmental overhead rate for the molding department based on machine hours and a department overhead rate for the trimming department based on direct labor hours. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

Department Overhead rate
  Molding  
  Trimming  

 

2. Determine the total overhead cost assigned to each product line using the departmental overhead rates from requirement 1. (Round your intermediate calculations to 2 decimal places and final answers to whole dollar amount. Omit the “$” sign in your response.)

 

  Product Molding Trimming Total overhead
cost
  Part A27C      
  Part X82B      

 

3. Determine the overhead cost per unit for each product line using the departmental rate.. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product Overhead cost
  Part A27C  
  Part X82B  

 

 

4.

Exercise 17-9 Using the plantwide Overhead rate to assess prices L.O. A1, P1

Real Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.

 

Process Activity Overhead Cost Driver Quantity
  Components   Changeover   $ 500,000   Number of batches 800
    Machining     279,000   Machine hours 6,000
    Setups     225,000   Number of setups 120
     


     
      $ 1,004,000      
  Finishing   Welding   $ 180,300   Welding hours 3,000
    Inspecting     210,000   Number of inspections 700
    Rework     75,000   Rework orders 300
     


     
      $ 465,300      
  Support   Purchasing   $ 135,000   Purchase orders 450
    Providing space     32,000   Number of units 5,000
    Providing utilities     65,000   Number of units 5,000
     


     
      $ 232,000      
     




     

 

Additional production information concerning its two product lines follows.

 

  Model 145 Model 212
  Units produced   1,500     3,500  
  Welding hours   800     2,200  
  Batches   400     400  
  Number of inspections   400     300  
  Machine hours   1,800     4,200  
  Setups   60     60  
  Rework orders   160     140  
  Purchase orders   300     150  

 

Required
1. Using a plantwide overhead rate based on machine hours, compute the overhead cost per unit for each product line. (Round your intermediate calculations and final answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product Overhead cost
  Model 145  
  Model 212  

 

2. Determine the total cost per unit for each products line if the direct labor and direct materials costs per unit are $250 for Model 145 and $180 for Model 212. (Round your intermediate and final answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product Total cost
  Model 145  
  Model 212  

 

3. Assume if the market price for Model 145 is $800 and the market price for Model 212 is $470, determine the profit or loss per unit for each model. (Input all amounts as positive values. Round your intermediate and final answers to 2 decimal places. Omit the “$” sign in your response.)

 

     
  Model 145    
  Model 212    

rev: 03-04-11

5.

Exercise 17-13 Using ABC for strategic decisions L.O. P1, P3

Consider the following data for two products of Rowena Manufacturing.

 

  Product A Product B
  Number of units produced   10,000 units   2,000 units
  Direct labor cost(@$24 per DLH)   0.20 DLH per unit   0.25 DLH per unit
  Direct materials cost   $ 2 per unit   $ 3 per unit

 

Activity Overhead costs
  Machine setup   $ 121,000  
  Materials handling     48,000  
  Quality control     80,000  
   


 
    $ 249,000  
   




 

 

Required
1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product A Product B
  Manufacturing cost per unit    

 

2. Assume if the market price for Product A is $20 and the market price for Product B is $60, determine the profit or loss per unit for each product. (Round your answers to 2 decimal places. Omit the “$” sign in your response. Input all amounts as positive values.)

 

     
  Product A    
  Product B    

 

3. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B? (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

  Product A Product B
  Number of setups required for production   10 setups   12 setups
  Number of parts required   1 part / unit   3 parts / unit
  Inspection hours required   40 hours   210 hours

 

  Product A Product B
  Manufacturing cost per unit    

 

4.1  Determine the profit or loss per unit for each product. (Round your answers to 2 decimal places. Input all amounts as positive values. Omit the “$” sign in your response.)

 

     
  Product A    
  Product B    

 

Problem 17-1A Evaluating product line costs and prices using ABC L.O. P3

[The following information applies to the questions displayed below.]

Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about these productsfollow.

 

  PowerPunch SlimLife
  Production volume 12,500  bottles 180,000  bottles
  Liquid materials 1,400  gallons 37,000  gallons
  Dry materials 620  pounds 12,000  pounds
  Bottles 12,500  bottles 180,000  bottles
  Labels 3  labels per bottle 1  label per bottle
  Machine setups 500  setups 300  setups
  Machine hours 200  MH 3,750  MH

 

Additional data from its two production departments follow.

 

Department Driver Cost
  Mixing department          
        Liquid materials   Gallons   $ 2,304  
        Dry materials   Pounds     6,941  
        Utilities   Machine hours     1,422  
  Bottling department          
        Bottles   Units   $ 77,000  
        Labeling   Labels per bottle     6,525  
        Machine setup   Setups     20,000  

 

     
     

 

7.

Problem 17-1A Part 2

2. What is the cost per bottle for PowerPunch and SlimLife? (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the “$” sign in your response.)

 

  PowerPunch SlimLife
  Average cost per bottle        

 

 

9.

 

Problem 17-1A Part 4

4. What is the minimum price that the company should set per bottle of SlimLife?

 

  $0.53 per bottle
  $0.86 per bottle
  $0.36 per bottle

 

The price of SlimLife must cover the costs associated with the product, so the minimum price for this product is $0.53 / bottle.

 

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