ACC 206 – MANAGERIAL ACCOUNTING
DUE DATE: TUESDAY, Octtober 13th, at the beginning of class.
Ramsey Company produces speakers (Model A and Model B). Both products pass through two production departments. Model A’s production is much more labor-intensive than that of Model B. Model B is the more popular of the two speakers. The following data have been gathered for the two products:
MODEL A MODEL B
Units produced per year 10,000 100,000
Prime costs $150,000 $1,500,000
Direct labor hours 140,000 300,000
Machine hours 20,000 200,000
Production runs (Number of setups) 40 60
Inspection hours 800 1,200
Maintenance hours 10,000 90,000
Setup costs $270,000
Inspection costs 210,000
Machining costs 240,000
Maintenance costs 270,000
REQUIRED (Show and Label all supporting calculations!!!!):
A. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours.
B. Compute the overhead cost per unit for each product by using Activity Based Costing.
C. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Dept. 1 (machine intensive) with a rate of $3.50 per machine hour and Dept. 2 (labor intensive) with a rate of $.90 per direct labor hour. The consumption of these two drivers is as follows:
DEPT. 1 DEPT. 2
Machine hours Labor hours
Model A 10,000 130,000
Model B 170,000 270,000
Compute the overhead cost per unit for each product by using departmental rates.
D. Calculate the consumption ratios for Model A using the four activities: machining, production, inspection, and maintenance. What conclusion can you reach based upon these consumption ratios?
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