Drivers and Product-Costing Accuracy McCourt Company produces two types of leather purses: standard and handcrafted. Both...

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1. Do you think that the direct labor costs and direct materials costs are accurately traced to each type of purse? 2. The co

Consider the information given on two products and their usage of two overhead activities (setups and inspection); Deluxe Mow

Drivers and Product-Costing Accuracy McCourt Company produces two types of leather purses: standard and handcrafted. Both purses use equipment for cutting and stitching. The equipment also has the capability of creating standard designs. The standard purses use only these standard designs. They are all of the same size to accommodate the design features of the equipment. The handcrafted purses can be cut to any size because the designs are created manually. Many of the manually produced designs are in response to specific requests of retailers. The equipment must be specially configured to accommodate the production of a batch of purses that will receive a handcrafted design. McCourt Company assigns overhead using direct labor dollars. Muggs Clark, sales manager, is convinced that the purses are not being costed correctly. To illustrate his point, he decided to focus on the expected annual setup and machine-related costs, which are as follows: Setup equipment $45,000 Depreciation 50,000 - Operating costs 55,000 * Computed on a straight-line basis; book value at the beginning of the year was $250,000. The machine has the capability of supplying 250,000 machine hours over its remaining life. Muggs also collected the expected annual prime costs for each purse, the machine hours, and the expected production (which is the normal output for the company). Handcrafted Purse $90,000 Direct labor Direct materials Units Standard Purse $30,000 $30,000 7,500 45,000 $30,000 7,500 Machine hours 5,000 Number of setups Setup time 1,000 hrs. 500 hrs.

1. Do you think that the direct labor costs and direct materials costs are accurately traced to each type of purse? 2. The controller has suggested that overhead costs be assigned to each product using a plantwide rate based on direct labor dollars. Machine costs and setup costs are overhead costs. Assume that these are the only overhead costs. For each type of purse, calculate the overhead per unit that would be assigned using a direct labor dollars overhead rate. Unit Overhead Cost Standard per purse Handcrafted $ per purse Do you think that these costs are traced accurately to each purse?! 3. Now calculate the overhead cost per unit per purse using two overhead rates: one for the setup activity and one for the machining activity. Round your answers to the nearest cent. Unit Overhead Cost Unit Overhead cost Standard per purse per purse per purse Handcrafted Handcrafted $ In choosing a driver to assign the setup costs, did you use number of setups or setup hours? Do you think machine costs are traced accurately to each type of purse?

Consider the information given on two products and their usage of two overhead activities (setups and inspection); Deluxe Mowers 10,000 Units produced Regular Mowers 40,000 500 Setup hours 1,000 500 500 Inspection hours Machine hours 300 1,500 Suppose that machine hours are used to assign all overhead costs to the two products. Which of the following is the best answer? a. Deluxe mowers are undercosted, and regular mowers are overcosted. b. Deluxe mowers and regular mowers are accurately costed. c. Deluxe mowers are overcosted, and regular mowers are undercosted. d. Using inspection hours to assign overhead costs is the best allocation approach.

 · Answer

Answote 0. Tyes] --> The direct labor and direct materials costs are accuratelas traced to each type of purses. The Direet material and labor come direct costs that are incurred in producing a product. -- Therefore, -these are divertly traceable costs. @1 standard handcrafted 30,000 90.000 Particulars Dixed labor.cost Oil xa&#322;e per darcat labor.com cvenhead applied. 125 1.25 37.500.00 1912,500.00 1500 7500 production Loh cost per unit 5 .00 15:00 150,000 Lestimated total overhead. Estimated direct labaz.cast - OH xate per direct laboi (6) -1120,000 millis particulars Amount setup.costs 45,000 Depreciation 50,000 operating costs. Total aucthcad. Do you think that these casts and traced accurately to Each www wasa 551000 150.000 2 Purse hand crafted 01_applied faceliwirty bomb Rale 30,00.00 1500 | 30 | 44,500 5,000 21 ou apkoed. |15.000. standard activity docell Ral&#305; Setup 1,000. 30 machinc. 45.000 Total ot applied I production, on.col.pero wanit care apare L 10.500 104.500 251500 2,500 3.500 1 6.60 T L 3.40 machine 105,000 estimated-total overhead estimated.cost drive.com Overhead tate communion setup 45,000 1,500 -30m 501000 2:10 cost druve commande set up hours machine hours. *In choosing a driver to assign the setup costs did you use number of sclups / etup hours o [ setup hours * - Do you think machinic costs are traced accurately to each type de purse (4) which de the following is the best answer&#34;: The correct answer is, :: Deluxe mowers are under costed, and recular mowers are: OVOrcosta. 3 . The comecet spion is@] The core option because, As machine hours 'is used as the allocation base foi the precde termined overhcad vate, delue mousers are undercosted (clopate consuming 1,000 hans d setup and 500 hours of inspection) since as compared to 1500 machine hour's consumed by the regular mowers, they consume only zoo machine hours. - o

Drivers and Product-Costing Accuracy McCourt Company produces two types of leather purses: standard and handcrafted. Both...

Drivers and Product-Costing Accuracy McCourt Company produces two types of leather purses: standard and handcrafted. Both...

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