Q 174

Office Innovations Corporation produces two types of electronic data organizers: basic and deluxe. The following information about the production process is available:
Total factory overhead is $10,000,000. Of this overhead, $4,000,000 is related to utilities and the remainder is related to quality control.
a. Determine the total overhead cost assigned to each type of data organizer using machine hours as the allocation base. Calculate the gross profit per unit for each product.
b. Determine the total overhead cost assigned to each type of data organizer if overhead is assigned using allocation bases appropriate to the overhead costs. Calculate the gross profit per unit of each product.
c. Explain why the unit cost for each model is different between the two methods of allocation.

Q 175

Seattle Grace Corporation manufactures two models of a medical device: Model 101 and Model 102.
Below is the current year production data for the company:
The 210,000 units of material had a total cost of $1,365,000. Direct labor is $17 per hour.
The company has total overhead production costs of $1,850,000.
a. If Seattle Grace Corporation applies factory overhead using direct labor hours, compute the total production cost and the unit cost for each model
b. If Seattle Grace Corporation applies factory overhead using machine hours, compute the total production cost and the unit cost for each model.
c. Assume that Seattle Grace Corporation has established the following activity centers, costs drivers, and costs to apply factory overhead.
Compute the total cost and the unit cost for each model.
d. Explain why the unit cost for each model is different across the three methods of overhead application. How can such information benefit an organization?

Q 176

Best Brew Corporation manufactures two brands of wine: Regular and Extra Rich
Below is the current year production data for the company:
The 335,000 pounds of material had a total cost of $753,750. Direct labor is $21 per hour.
The company has total overhead production costs of $2,212,125.
a. If Best Brew Corporation applies factory overhead using direct labor hours, compute the total production cost and the unit cost for each brand
b. If Best Brew Corporation applies factory overhead using machine hours, compute the total production cost and the unit cost for each brand.
c. Assume that Best Brew Corporation has established the following activity centers, cost drivers, and costs to apply factory overhead.
Compute the total cost and the unit cost for each brand.
d. Explain why the unit cost for each model is different across the three methods of overhead application. How can this information benefit the organization?