Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on machine hours,what is the revised product cost per case for Product J?
A)$161.50.
B)$169.30.
C)$172.00.
D)$183.36.

Question

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows:  Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on machine hours,what is the revised product cost per case for Product J?
A)$161.50. 
B)$169.30. 
C)$172.00. 
D)$183.36.

Quizplus · Accepted Answer

First, we need to calculate the plantwide rate based on machine hours: 
Total overhead costs = $16,200 + $11,100 + $2,700 = $30,000 
Total machine hours = 1,200 + 900 = 2,100 
Plantwide rate per machine hour = $30,000 ÷ 2,100 = $14.29

Next, we need to calculate the overhead cost for each product using the new rate:

Product J: 
Machine hours = 1,200 
Overhead cost = $14.29 × 1,200 = $17,148 
Cost per case = $125 + $12 + $2 + $17,148 ÷ 5,000 cases = $172.00

Therefore, the revised product cost per case for Product J is $172.00.

Smelly Perfume Company Manufactures and Distributes Several Different Products