1. Flyer Corporation manufactures two products, Product A and Product B. Product B is the more complex of the two products, requiring three hours of direct labor time per unit to manufacture compared to one and one-half hours of direct labor time for each unit of Product A.
Overhead is currently assigned to the products on the basis of direct labor hours. The company estimated it would incur $396,000 in manufacturing overhead costs and produce 5,500 units of Product B and 22,000 units of Product A during the current year (for a total estimated direct labor hours of 49,500). Costs for materials and direct labor per unit of product are:
a. What would be the Predetermined Overhead Rate per DLH using Traditional Costing?
b. Using Traditional Costing, what amount of overhead would be applied to each unit of Product A? To each unit of product B?
c. Using Traditional Costing, calculate the product cost per unit for Product A and for Product B.
(Now switching to Activity Based Costing) The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below:
d. Using Activity Based Costing, calculate the predetermined overhead rate for each of the four cost pools.
e. Using Activity Based Costing, what amount of overhead would be applied to each unit of Product A? To each unit of Product B?
f. Using Activity Based Costing, calculate the product cost per unit for Product A and for Product B.
2. The following information is budgeted for McCracken Plumbing Supply Company for next quarter: April May June Sales $110,000 $130,000 $180,000 Merchandise purchases $85,000 $92,000 $105,000 Selling and administrative expenses $50,000 $50,000 $50,000 All sales at McCracken are on credit. Forty percent are collected in the month of sale, 57% in the month following the sale, and the remaining 3% are uncollectible. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include $9,500 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid as incurred. McCracken wants to maintain a cash balance of $17,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at month end.
Prepare McCracken's cash budget for the month of May. McCracken expects to have $24,950 of cash on hand at the beginning of May.