Reference no: EM132507756

Long Ave Inc. manufactures two products, Standard and Deluxe. Manufacturing overhead costs consist of:

Activity Overhead Cost

Setting Up Machines $240,000

Machine Fabrication $545,000

Inspecting $470,000

Shipping $770,000

Purchasing $335,000

Information on the two products is as follows:

Cost Driver                  Standard               Deluxe

Direct Labour Hours     345,000            145,000

Machine Setups              275                 460

Machine Hours              33,750            44,300

Inspections                   450                 285

Parts Shipped              6,800             8,500

Purchasing Orders           400               300

Currently, the controller uses a plant-wide overhead rate based on direct labour hours to assign overhead to the Standard and Deluxe products. The president has heard of activity-based costing and wants to see how the results would differ if this system were used.

Required:

Question 1. Assign the total manufacturing overhead costs to the two products using the current plantwide method.

Question 2. Assign the total manufacturing overhead costs to the two products using activity-based costing (ABC).

Ventana Inc. sells a single product for $48. Its management estimates the following revenues and costs for the year 2019:

Net Sales $620,000

Selling expenses - Variable $18,500

Direct Materials 85,000

Selling expenses - Fixed 21,500

Direct Labour 78,000

Admin expenses - Variable 3,500

Mfg Overhead - Variable 32,000

Admin expenses - Fixed 2,500

Mfg Overhead - Fixed 25,000

Required:

Question 3. Assuming fixed costs and net sales are spread evenly throughout the year, determine Ventana's monthly break-even point in (a) units and (b) dollars.

Question 4. Calculate the contribution margin ratio, the annual margin of safety ratio, and the annual profit

Question 5. Determine the percentage increase of annual profits if Ventana Inc. increases its selling price by 25% and all other factors (including demand) remain constant.

Question 6. Assume the price remains at $48 per unit and variable costs remain the same per unit, but fixed costs increase by 15% annually. Calculate the percentage increase in unit sales required to achieve the same level of annual profit calculated in required # 2

Question 7. Determine the sales required to earn an operating income of $375,000 after tax. Ventana Inc.'s income tax is 28%.

Far Play Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labour cost in Department A, direct labour hours in Department B, and machine hours in Department C. In establishing the predetermined overhead rates for 2019, the following estimates were made for the year.

Department                               A                    B                      C

Manufacturing Overhead      $720,000     $620,000          $910,000

Direct labour Cost                 $590,000      $125,000         $620,000

Direct labour Hours                 47,500            41,500           40,000

Machine Hours                         91,000               107,000          128,500

During January, the job cost sheets showed the following costs and production data.

Department                                        A              B                              C

Direct Materials Used                $92,500         $82,000           $66,000

Direct Labour Cost                    $54,500            $33,000             $48.500

Manufacturing Overhead Incurred $63,500              $69,500             $72,500

Direct Labour Hours                     3,500                    4,400                4,400

Machine Hours                           7,250                    10,750               14,500

Required:

Question 8. Calculate the predetermined overhead rate for each department

Question 9. Calculate the total manufacturing costs assigned to jobs in January in each department.

Question 10. Calculate the under-or over-applied overhead for each department at January 31st .