Essay
Falcon Crest Corporation manufactures two brands of wine: Regular and Extra Rich
Below is the current year production data for the company:
| Regular | Extra Rich | |
|---|---|---|
| Direct material in pounds | 225,000 | 110,000 |
| Direct labor hours | 45,000 | 65,000 |
| Machine hours | 36,000 | 24,000 |
| Number of setups | 1,450 | 65,000 |
| Number of gallons produced | 450,000 | 90,000 |
The 335,000 pounds of material had a total cost of $753,750.Direct labor is $21 per hour.
The company has total overhead production costs of $2,212,125.
a.If Falcon Crest Corporation applies factory overhead using direct labor hours,compute the total production cost and the unit cost for each brand
b.If Falcon Crest Corporation applies factory overhead using machine hours,compute the total production cost and the unit cost for each brand.
c.Assume that Falcon Crest Corporation has established the following activity centers,cost drivers,and costs to apply factory overhead.
| Cost Pool | Cost Driver | Cost | Volume |
|---|---|---|---|
| Equipment Maintenance | # of machine hours | $450,000 | 60,000 |
| Production Setup | # of setups | $248,625 | 3,825 |
| Material Handling | Pounds of Materials | $703,500 | 335,000 |
| Storage Costs | # of gallons produced | $810,000 | 540,000 |
Compute the total cost and the unit cost for each brand.
d.Explain why the unit cost for each model is different across the three methods of overhead application.How can this information benefit the organization?
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d.The allocation of overhead using vol...View Answer
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Correct Answer:
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d.The allocation of overhead using vol...
View Answer
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