Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) Two companies which have been competitors for many years newly decided to quit fighting each other and merge into one company. Companies were siyuated next to each other and shared common wall for plant space. In the effort to promote goodwill and to raise transparency between companies, the recently merged enterprise knocked down common wall which once separated them. Top management agreed that control of operations would be equally shared and that original plant managers would continue to operate similarly to how they had in past, except now as one company with two divisions (A and B) and two division managers.

Companies (now divisions) each made same product and produced at the same rate. Only apparent difference was that Division A was more labor-intensive, by using many workers with simple tools to get their production, where as more capital-intensive Division B used automated machines and fewer workers to get production. Otherwise, their respective product outputs were same. Both companies manufactured at the rate of 1,000 units per year.  Division A assigned overhead based on direct labor hours (DLH) where as Division B allocated overhead based on machine hours (MH).

Cost data for most recent year reflected same actual amount of overhead resource usage per DLH ($25) and per MH ($40) between divisions, but divisions incurred slightly different total overhead costs per unit of product because of emphasis on labor in A and machines in B. Because of this, actual cost of overhead was given below:

Division A

 

Division B

DLH = 5 per product unit @ $25 = $125 per unit

 

DLH = 2 per product unit @ $25 = $50 per unit

MH = 2 per product unit @ $40 = $80 per unit

 

MH = 4 per product unit @ $40 = $160 per unit

Total actual overhead cost per unit = $205

 

Total actual overhead cost per unit = $210

Total actual overhead cost incurred = $205,000

 

Total actual overhead cost incurred = $210,000

Other costs comprise direct material (DM) of $100 per product unit for both divisions and direct labor of $50 per product unit for Division A and $20 per product unit for Division B reflecting wage rate of $10 per direct labor hour (DLH).

After merger operations manager of each division decided it would be much simpler to assign costs by using one plant wide rate as they did before merger. Machine hours are selected as basis for allocation as this is what Division B used. This decision was based on fact that Division B seems more efficient, given Division B\'s lower total cost per unit.  Moreover, top management reasons that Division B appears to be the more modern and progressive of two companies given their degree of automation. They also think allocation based on MH more accurately reflects trend of operations in future.

Compute new overhead allocation rate (i.e., per MH) suppose that estimated overhead is $400,000;  estimated MH = 10,000.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918727

Have any Question? 


Related Questions in Accounting Basics

Assignmentthe company that i chose to research came to me

Assignment The company that I chose to research came to me on the way home from work this week while sitting in traffic. A string of several ads came on the radio and got a little frustrated that my Christmas tunes were ...

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around acquisition accounting to a real-world example. Requirements for the assignment: Each student will select ...

1 if a bartender can somehow accumulate extra liquor and

1. If a bartender can somehow accumulate extra liquor, and does not register the extra drinks, which of these activities could be spotted by the analytical methods we studied? A. The bartender steals the extra liquor B. ...

Problem -firm has consulted with investment bankers and

Problem - Firm has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of fi ...

Your city has decided to build a new library the projected

Your city has decided to build a new library. The projected cost is $2 million. A bond issue for $1.2 million has been authorized, and the remainder is supposed to come from a contribution of $800,000 from the general fu ...

1 ahn nguyen a vietnamese joint stock company has net

1. Ahn Nguyen, a Vietnamese Joint Stock Company has net income of 52,000 Vietnamese Dong, () and the following items: Depreciation Expense   16,000 Accounts Receivable Increase                    12,000 Inventory Decreas ...

Assignment accounting qualitybased on the requirements of

Assignment: Accounting Quality Based on the requirements of the Sarbanes-Oxley Act and SEC reporting requirements for publically traded companies, Write a five page paper in which you: 1. Assess the roles of the Board of ...

1 regarding the ottoman territories during the period

1. Regarding the Ottoman territories during the period immediately following World War I, which of the following statements is false? A. Defying Allied pressure, the Turkish sultan supported Kemal. B. In 1921, Greek forc ...

Intermediate management accounting1carpe diem co reported

Intermediate Management Accounting 1. Carpe Diem Co. reported the following variances for the period: Direct materials price variance $1,700 U Direct labour efficiency variance 23,600 U Fixed overhead volume variance 10, ...

Assignment managerial accountingbackgroundperformance

Assignment: Managerial Accounting Background: Performance Drinks, LLC is owned by Dave N. Port. Performance Drinks produces a variety of sports centered drinks. They began operations in 1993 shortly after Mr. Port gradua ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro