Reference no: EM13554717

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.