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 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:
Assume that Bugaboo sells all the boxes it produces in May.
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 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:
  Assume that Bugaboo sells all the boxes it produces in May.
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 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:
  Assume that Bugaboo sells all the boxes it produces in May.
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?