Baseball bats revenue 1,350,000, direct labor 250,000, and direct materials 550,000
Tennis Rackets revenue 900,000, direct labor 125,000 and direct materials 275,000
Munoz sporting equipment manufactures bats and rackets. Department B produces bats and Dept. T produces rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor costs is the allocation base. The rate used is 200% of direct labor.
Required:
a. Compute the profit for each product using plantwide allocation
b. It was asked that the overhead costs be broken down for the two departments. It was discovered that had department rates been used, Department B would have had a rate of 150% of direct labor cost and Department T would have had a rate of 300% of direct labor cost. Recompute the profits for each product using each department's allocation rate.
c. why are the results of a and b different.