Reference no: EM132370600

Case 19-1 - Bennett Body Company*

Questions :

1. As Mr. Kern, what would you be prepared to say in response to Mr. Bennett's memorandum?

2. How, if at all, should Bennett modify its present system?

Problems

Problem 19-1.

Veronica Company allocates overhead costs to jobs on the basis of direct labor-hours. its estimated average monthly factory costs for 2005 were as follows:

	Average Monthly Costs
Direct material cost	$ 60,000
Direct labor cost	300,000
Overhead cost	180,000

Its estimated average monthly direct labor-hours arc 20,000. Among the jobs worked on in November 2005 were two jobs, G and H, for which the following information was collected:

	Job G	Job H
Direct material cost	$10,000	$10,000
Direct labor cost	28,000	32,000
Direct labor-hours	2,400	2,800

Required:

a. Compute the overhead rate for Veronica Company.

b. Compute the total production costs of jobs G and H.

c. At what amounts would customers be billed if the company's practice was to charge 180 percent of the production cost of each job?

Problem 19-2.

The production processes involved in making maple syrup also can produce maple sugar. Vt. Sugar Enterprises wishes to produce only syrup, but on occasion some sugaring takes place. Production for April produced the following results:

Units produced Unit selling price Total process costs: After split-off joint costs

Syrup 20,000 $15.00 $1 2,000

Sugar 1,000 $2.00 $280

Total 21,000 $12,280 $100,000

Required:

a. Calculate the cost of the syrup if the sugar is considered a by-product and the gross margin from its sale is considered to be a reduction of syrup cost.

b. Calculate product costs assuming this company decided to make and sell as much maple sugar as possible after filling all syrup orders (i.e., it regarded syrup and sugar as joint products). Use the sales value method.

Attachment:- Case 19-1.rar