Excel solutions - 15_47_soln

Excel solutions - 15_47_soln - 58.20 106.80 Price $446.20...

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Problem 15-47 Student Name: Instructor Class: McGraw-Hill/Irwin Sounds Fine, Inc. Computations 1. Budgeted overhead costs: Department I Department II Variable overhead $300,000 $150,000 Fixed overhead 150,000 150,000 Total overhead $450,000 $300,000 Total budgeted overhead for both departments $750,000 Total expected direct-labor hours for both departments 75,000 Predetermined overhead rate per direct-labor hour $10.00 2. Price with absorption manufacturing cost plus Standard Deluxe Total cost $400.00 $500.00 Markup 60.00 75.00 Price $460.00 $575.00 3. Departmental overhead rates: Department I Department II Budgeted overhead $450,000 $300,000 Budgeted direct-labor hours 37,500 37,500 Predetermined overhead rate $12.00 $8.00 4. Absorption cost of each speaker: Standard Deluxe Direct material $160 $390 Direct labor 140 210 Manufacturing overhead: Department I 24 96 Department II 64 16 Total cost $388 $712 5. Price using new absorption cost plus Standard Deluxe Total cost $388.00 $712.00 Markup
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Unformatted text preview: 58.20 106.80 Price $446.20 $818.80 6. Should Sounds Fine, Inc. use plantwide or departmental overhead rates? Explain your answer. The management of Sounds Fine, Inc. should use department overhead rates. The overhead cost structures in the two production departments are quire different, and departmental rates more accurately assign overhead costs to products. When the company used a plantwide overhead rate, the Standard speakers were overcosted and the Deluxe speakers were undercosted. This in turn resulted in the Standard model being overpriced and the Deluxe model being underpriced. The cost and price distortion resulted from the following facts: (1) the Standard speakers spend most of their production time in Department II, which is the least costly of the two departments; and (2) the Deluxe speakers spend most of their production time in Department I, which is more costly than Department II....
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