Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 15

Two-Stage Allocation and Product Costing
Mets Products produces baseball caps and T-shirts. Most of the production is done by machine. Data on operations and costs for October follow:

Management asks the firm's cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machinehours. The analysis of overhead accounts by the cost accountant follows:

Required
a. Compute the predetermined overhead rates assuming that Mets Products uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.
b. Compute the total costs of production and the cost per unit for each of the two products for October.