Problem:
Two-Stage Allocation and Product Costing
Mets Products produces baseball caps and T-shirts. Most of the production is done by machine. Data on operations and costs for October follow:
|
|
Baseball Caps
|
T-Shirts
|
Total
|
|
Units produced
|
10,000
|
5,000
|
15,000
|
|
Machine-hours used
|
1,000
|
800
|
1,800
|
|
Direct labor-hours
|
200
|
120
|
320
|
|
Direct materials costs
|
$12,000
|
$8,000
|
$20,000
|
|
Direct labor costs
|
$ 4,000
|
$2,400
|
$ 6,400
|
|
Manufacturing overhead costs
|
|
|
$22,200
|
Management asks the firm's cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine hours. The analysis of overhead accounts by the cost accountant follows:
|
Account
|
Amount
|
Related to:
|
|
Utilities
|
$4,000
|
Machine-hours
|
|
Supplies
|
2,800
|
Materials
|
|
Machine depreciation and maintenance .
|
8,800
|
Machine-hours
|
|
Purchasing and storing materials
|
3,200
|
Materials
|
|
Miscellaneous
|
3,400
|
Machine-hours
|
Required
a. Compute the predetermined overhead rates assuming that Mets Products uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.
b. Compute the total costs of production and the cost per unit for each of the two products for October.