Bugaboo Co. manufactures three types of cookies: Fluffs, Crinkles, and Snaps. The production process is relatively simple, and factory overhead costs are allocated to products using a single plantwide factory overhead rate based on direct labor hours. Information for the month of May, Bugaboo's first month of operations, follows: Bugaboo has budgeted direct labor costs for May at $8.50 per hour. Budgeted direct materials costs for May are: Fluffs, $0.75/unit; Crinkles $0.40/unit; and Snaps $0.30/unit.Bugaboo's budgeted overhead costs for May are:
a.Compute Bugaboo's plantwide factory overhead rate for May.
b.Compute the product cost in May for each type of cookie.
c.Does Bugaboo's use of a plantwide factory overhead rate in any way distort the product costs for May?

Question

Bugaboo Co. manufactures three types of cookies: Fluffs, Crinkles, and Snaps. The production process is relatively simple, and factory overhead costs are allocated to products using a single plantwide factory overhead rate based on direct labor hours. Information for the month of May, Bugaboo's first month of operations, follows:  Bugaboo has budgeted direct labor costs for May at $8.50 per hour. Budgeted direct materials costs for May are: Fluffs, $0.75/unit; Crinkles $0.40/unit; and Snaps $0.30/unit.Bugaboo's budgeted overhead costs for May are:  
a.Compute Bugaboo's plantwide factory overhead rate for May.
b.Compute the product cost in May for each type of cookie.
c.Does Bugaboo's use of a plantwide factory overhead rate in any way distort the product costs for May?

Quizplus · Accepted Answer

The Answer of Bugaboo Co. manufactures three types of cookies: Fluffs, Crinkles, and Snaps. The production process is relatively simple, and factory overhead costs are allocated to products using a single plantwide factory overhead rate based on direct labor hours. Information for the month of May, Bugaboo's first month of operations, follows:  Bugaboo has budgeted direct labor costs for May at $8.50 per hour. Budgeted direct materials costs for May are: Fluffs, $0.75/unit; Crinkles $0.40/unit; and Snaps $0.30/unit.Bugaboo's budgeted overhead costs for May are:  
a.Compute Bugaboo's plantwide factory overhead rate for May.
b.Compute the product cost in May for each type of cookie.
c.Does Bugaboo's use of a plantwide factory overhead rate in any way distort the product costs for May?