Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) Curtis Corporation is beginning in manufacture Mighty Mint, new mouthwash in small spray container. Product will be sold to wholesalers and large drugstore chains in packages of 30 containers for $18 per package. Management assigns $200,000 of sited manufacturing overhead costs to Mighty Mint. Manufacturing cost per package of 30 containers of expected production of 100,000 packages is as follows;

Direct material

$6.50

Direct labor

3.5

Overhead (fixed and variable)

3

Total

$13.00

 

 

Model 501

Model 541

Model 599

Selling price

$5,000

$10,000

$13,000

Unit cost:

 

 

 

Material

1,050

4,500

6,000

Direct labor

500

2,000

4,000

Overhead

769

3,077

6,154

Unit profit (loss)

$2,681

$423

($3,154)

 Basically, all overhead costs are fixed. Some of fixed overhead costs are direct costs to particular models and others are common fixed costs.

Estimated total overhead

 

Model 501

Model 541

Model 599

Total

Direct fixed

$4,000,000

$1,500,000

$500,000

$6,000,000

Common fixed

 

 

 

4,000,000

Total

 

 

 

$10,000,000

Lennon allocates overhead costs to products using single overhead rate developed as follows. Estimated total overhead is divided by estimated direct labor cost. This results in overhead rate per labour dollar. This rate is used to allocate standard over-head to products. Below are estimates of sales and direct labour. These values simply the overhead rate of $1.5385 per labour dollar ($10,000,000 ÷ $6,500,000).

 

Model 501

Model 541

Model 599

Total

Estimated unit sales

1,000

2,000

500

3,500

Estimated labor

$500,000

$4,000,000

$2,000,000

$6,500,000

 Required

As it is showing loss, controller of Lennon has asked you to analyze whether Model 599 must be dropped. You must suppose that direct fixed costs will be avoided if model is dropped but common fixed costs will not be model is dropped.

describe why the method used to allocate costs at Lennon results in "unreasonably high" charges to the Model 599 pump.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M916400

Have any Question? 


Related Questions in Accounting Basics

A company is considering to replace an existing machine for

A Company is considering to replace an existing machine for which two suppliers have given quotation. Supplier A has proposed a machine costing Rs. 180 lakh that uses the existing boiler while supplier B has quoted for t ...

Kiona co set up a petty cash fund for payments of small

Kiona Co. set up a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in May (the last month of the company's fiscal year). May 1 Prepared a company check for ...

Assignment comparing capital expenditurescomparing capital

Assignment: Comparing Capital Expenditures Comparing Capital Expenditures Select a company and access the last three years' annual reports. Next, select a company that is a direct competitor and download the previous thr ...

Problem 1abc stock has a share price of 150 today all

Problem 1 ABC stock has a share price of $150 today. All rates of interest are 3% per annum on a continuously compounded basis. A one-year European call option on one share of stock struck at $147 is worth $15. Finally, ...

Standard prices for medicineread the article magic pill

Standard Prices for Medicine Read the article, "Magic Pill, Magical Accounting." Based on the content presented in the article, describe some of the issues with not having an industry-wide standard price for a medicine. ...

Vaughn company reports the following financial information

Vaughn Company reports the following financial information before adjustments.   Dr. Cr. Accounts Receivable $155,400 Allowance for Doubtful Accounts   $3,890 Sales Revenue (all on credit)   800,700 Sales Returns and All ...

Write a 600-800 word memo to your accounting committee on

Write a 600-800 word memo to your accounting committee on fraud detection discussing the 6 steps of the Proactive Method of Fraud Detection found in figure 6.1 of Chapter 6. Include methods to gather information about a ...

Accounting information systemsfor this assignment research

Accounting Information Systems For this assignment, research the Internet or Strayer databases to locate a firm that was involved in a fraud and / or embezzlement case. Explain how the firm's accounting information syste ...

Q1 what was the logic behind the gentiles who asked for

Q.1 what was the logic behind the gentiles who asked for chanja Finkelsztjains world goods( and similar anecdotes) Q.2 how does the author regard the plundering of the Jews? Q.3 Why did so many Jews leave valuables with ...

Assignmentpaper 1excel spreadsheet and 1-2 pagesconsider

Assignment Paper #1 Excel Spreadsheet and 1-2 pages Consider the following scenario: Andre has asked you to evaluate his business, Andre's Hair Styling. Andre has five barbers working for him. (Andre is not one of them.) ...

  • 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