Reference no: EM13554711

Account Analysis, Two-Stage Allocation, and Product Costing

Tiger Furnishings's CFO believes that a two-stage cost allocation system would give managers better cost information. She asks the company's cost accountant to analyze the accounts and assign overhead costs to two pools: overhead related to direct labor cost and overhead related to machine-hours.

The analysis of overhead accounts by the cost accountant follows:

Manufacturing Overhead	Overhead Estimate	Cost Pool Assignment
Utilities	$ 1,800	Machine-hour related
Supplies	5,000	Direct labor cost related
Training	10,000	Direct labor cost related
Supervision	25,800	Direct labor cost related
Machine depreciation	32,000	Machine-hour related
Plant depreciation	14,200	Machine-hour related
Miscellaneous	85,300	Direct labor cost related

Required

a. Draw the cost flow diagram that illustrates the two-stage cost allocation of overhead for Tiger Furnishings using the results of the cost accountant's analysis of accounts.

b. Compute the product costs per unit assuming that Tiger Furnishings uses direct labor costs and machine-hours to allocate overhead to the products.