CH 9 HW.xlsx - Munoz Sporting Equipment manufactures...

Baseball Bats Tennis Rackets
Sales revenue $1,530,000 $975,000
Direct labor $320,000 $160,000
Direct materials $559,000 $282,000
a. Compute the profit for each product using plantwide allocation.
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B
produces the baseball bats, and Department T produces the tennis rackets. Munoz
currently uses plantwide allocation to allocate its overhead to all products. Direct labor
cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year,
revenue, materials, and direct labor were as follows:
b. Maria, the manager of Department T, was convinced that tennis rackets were really
more profitable than baseball bats. She asked her colleague in accounting to break down
the overhead costs for the two departments. She discovered that had department rates
been used, Department B would have had a rate of 150 percent of direct labor cost and
Department T would have had a rate of 300 percent of direct labor cost. Recompute the
profits for each product using each department’s allocation rate (based on direct labor
cost).

Dept B Dept T
Sales Rev $1,530,000 $975,000
Labor $320,000 $160,000
Materials $559,000 $282,000
Applied MO $640,000 $320,000
Total Cost $1,519,000 $762,000
Profit $11,000 $213,000
Dept T
$975,000
$160,000
$282,000
$480,000
$922,000
$53,000

Activities (and cost drivers) Afternoon Picnic Formal Dinner
Advertising (parties) $83 per party $83 per party
Planning (parties) $96 per party $106 per party
Renting equipment $57 per party plus $78 per party plus
(parties, guests) $14 per guest $23 per guest
Obtaining insurance (parties) $235 per party $430 per party
Serving (parties, servers) $50 per server per party $70 per server per party
Preparing food (guests) $22 per guest $32 per guest
Per party costs do not vary with the number of guests.
a. Compute the cost of a 20-guest afternoon picnic.