Qeagle company manufactures components for aircraft engines

Reference no: EM13351579

Eagle Company manufactures components for aircraft engines. 2012 direct cost data for Eagle's three largest customers are as given:

Pratt RR Armstrong

Sales (units) 450 1,000 600

Direct Materials $302, 400 $935,000 $420,000

Direct Labor $ 317,250 $ 852,500 $ 450,000

Dire Labor Hours 637,500 1,820,000 900,000

Also in 2012 Eagle Company incurred overhead costs of $2,551,700. Eagle presently uses a traditional volume-based cost allocation method based on direct labor hours.

Required:

On a separate sheet of paper complete questions 1.

Show all supporting computation for credit.

1. Determine the overhead allocation rate using the present traditional volume-based allocation method.

2. Evaluate the total manufacturing cost per unit of each customer (Pratt, RR and Armstrong) using the present allocation method.

Management in the implementation of activity-based costing (ABC) for the allocation of overhead. Given below are the 2012 cost and activities related to the overhead cost drivers.

Cost driver activity

Activity & Cost Driver Overhead Cost Pratt RR Armstrong

Machine set-up (# set-ups) $ 945,000 150 750 600

Assembly(# machine hrs.) $ 858,500 80 225 120

Materials handling (# purchase orders) $ 328,950 64 86 65

Inspections ( # Inspections) $ 419,250 325 1,180 645

3. Evaluate the ABC allocation rate for each of the activities from the ABC information given above.

4. Determine the total manufacturing cost per unit of each customer: Pratt, RR and Armstrong by the BC method of allocating overhead costs.

5. Compare the ABC net cost per unit of each product (Q4) to the volume-based total cost per unit of each product (Q2) and identify for each product if the over-costed or under-costed.

6. Which allocation system do you recommend Eagel Co. use to allocate overhead costs (current or ABC)? How is this method needful to support management decision making?

Reference no: EM13351579

Questions Cloud

Qevaluate debit and credit card feesthe local : qevaluate debit and credit card feesthe local japanese-style steakhouse expects sales to be 50000 in january. the

Qrecognize types of responsibility centersrecognize each : qrecognize types of responsibility centersrecognize each responsibility center as a cost center a profit center a

Qa complete and examine a performance reportone subunit of : qa complete and examine a performance reportone subunit of hazelton sports company has the subsequent financial results

Qreporting and computing the acquisition and amortization : qreporting and computing the acquisition and amortization of three different intangible assetskreiser company had three

Qeagle company manufactures components for aircraft engines : qeagle company manufactures components for aircraft engines. 2012 direct cost data for eagles three largest customers

Qgerhan companys flexible budget for the units essentially : qgerhan companys flexible budget for the units essentially manufactured in may shows 15640 of total factory overhead

Qover the past 15 years anthonys auto shop has prepared a : qover the past 15 years anthonys auto shop has prepared a reputation for reliable repairs and has grown from a

Q ron williams currently took over as the controller of : q ron williams currently took over as the controller of johnson brothers manufacturing. last month the last controller

Qarts corporation provides a generous employee compensation : qarts corporation provides a generous employee compensation package that adds employee stock options. the exercise

User Account

All Pages