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Exercise 9-43 (Algo) Activity-Based versus Traditional Costing (LO 9-4,5,6) Maglie Company manufactures two video game consoles:...

Question

Exercise 9-43 (Algo) Activity-Based versus Traditional Costing (LO 9-4,5,6) Maglie Company manufactures two video game consoles:...

Exercise 9-43 (Algo) Activity-Based versus Traditional Costing (LO 9-4,5,6) Maglie Company manufactures two video game consol
Required: . How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? Wha
Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? Wh
Exercise 9-43 (Algo) Activity-Based versus Traditional Costing (LO 9-4,5,6) Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,477,000 based on production of 290,000 handheld consoles and 86,000 home consoles Direct labor and direct materials costs were as follows. Total Direct labor Materials Handheld Home $1,451,250 $395,000 7 10, 809691,000 $1,846,250 1,401,000 Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows Activity Level Handheld Home costs Asal Costs Assigned $ 715,000 Total Cost Oriver Number of production runs Quality tests performed Shipping orders processed Total overhead 160 192,000 51,472,000
Required: . How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per una produced for each product? Complete this question by entering your answers in the tabs below. Required A Required B How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total Cost per Unit" to 2 decimal places.) Overhead Total Cost per Unit Handheld Home Required B >
Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much overhead will be assigned to each product of direct labor cost is used to allocate overhead? What is the total cost per un produced for each product? Complete this question by entering your answers in the tabs below. Required A Required How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round "Total cost per unit to 2 decimal places.) Overhead Total Cost per Unit Handheld Home < Required A Read

Answers

Activity Rate = Overhead/Total Driver
Cost Handheld Home Total Rate
Number of production runs 715000 45 10 55 13000
Quality tests performed 570000 13 17 30 19000
Shipping orders processed 192000 110 50 160 1200
Total 1477000
Overhead Assigned = Rate*Driver consumed
Handheld Home
Number of production runs          585,000          130,000
Quality tests performed          247,000          323,000
Shipping orders processed          132,000            60,000
Total          964,000          513,000
Calculation of cost per unit
Handheld Home
Direct labor       1,451,250          395,000
Material          710,000          691,000
Overhead          964,000          513,000
Total cost       3,125,250       1,599,000
Number of units          290,000            86,000
Cost per unit 10.77672414 18.59302326
If Direct labor cost is used
Handheld Home
Direct labor       1,451,250          395,000
Material          710,000          691,000
Overhead       1,161,000          316,000
Total cost       3,322,250       1,402,000
Number of units          290,000            86,000
Cost per unit 11.45603448 16.30232558


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