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

Accounting assignmentyour response should be 2-3 pages

Accounting Assignment YOUR RESPONSE SHOULD BE 2-3 PAGES COMPRISING BOTH RESEARCH CASES. Professional Research 1 Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is n ...

Ginos restaurant is a popular restaurant in boston

Gino's Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based cos ...

Assignment business analyticsthis assignment requires you

Assignment Business Analytics This Assignment requires you to use Excel in all three questions. Make sure you explain your answers and provide the regression output tables for questions 1 and 2. Submit your Assignment to ...

Question 1under the allowance method bad debt expense is

Question 1 Under the allowance method, Bad Debt Expense is recorded A. as an estimate. B. when an individual account is written off. C. several times during the year as needed. D. None of the above Question 2 Which amoun ...

Discussionpart 1 please respond the following question no

Discussion Part 1 please respond the following question no less then 350 words (original work, no plagiarism, 1 reference "learning experience and application of knowledge" please respond to the following: • Assume you h ...

Study guide1 what is the beta of a firm whose equity has an

STUDY GUIDE 1. What is the beta of a firm whose equity has an expected return of 21.30%, the risk-free rate is 7%, and the expected return on the stock market is 18%? 2. Two reasons for the agency problem in modern corpo ...

On december 31 2017 buffalo company signed a 1137500 note

On December 31, 2017, Buffalo Company signed a $1,137,500 note to Carla Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Un ...

Accountingnorthwest fur co started 2016 with 114000 of

Accounting Northwest Fur Co. started 2016 with $114,000 of merchandise inventory on hand. During 2016, $410,000 in merchandise was purchased on account with credit terms of 2/15, n/45. All discounts were taken. Purchases ...

Guidelines for literature critiquesstudents are require to

Guidelines for Literature Critiques Students are require to read and understand assigned article. Students must submit a critique of assigned academic article. Please follow the format to complete your assignment. Detail ...

Waupaca company establishes a 480 petty cash fund on

Waupaca Company establishes a $480 petty cash fund on September 9. On September 30, the fund shows $211 in cash along with receipts for the following expenditures: transportation-in, $51; postage expenses, $65; and misce ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen