Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensivethan the home consoles. The company only recently began producing the home model. Since the introduction of the new product,profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products,particularly because sales of the new product have been increasing.Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned toproducts based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was$1,204,000 based on production of 300,000 handheld consoles and 92,000 home consoles. Direct labor and direct materials costswere as follows.HandheldHomeTotal$378,000693,000$1,505,0001,433,000Direct labor$1,127,000740,000MaterialsManagement has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are asfollows.Activity LevelCosts Assigned$Cost DriverHandheldHomeTotalNumber of production runsQuality tests performedShipping orders processed520,000544,000140,0003010401319328060140Total overhead$1,204,000 Required:a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the totalcost per unit produced for each product?b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unitproduced for each product?Complete this question by entering your answers in the tabs below.Required ARequired BHow much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is thetotal cost per unit produced for each product? (Round "Total Cost per Unit" to 2 decimal places.)Total Cost perOverheadUnitHandheldHomeRequired:a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the totalcost per unit produced for each product?b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unitproduced for each product?Complete this question by entering your answers in the tabs below.Required ARequired BHow much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total costper unit produced for each product? (Do not round intermediate calculations. Round "Total cost per unit" to 2 decimal places.)Total Cost perUnitOverheadHandheldHome

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Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive han the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,204,000 based on production of 300,000 handheld consoles and 92,000 home consoles. Direct labor and direct materials costs vere as follows. Handheld Нome Total Direct labor $1,127,000 740,000 $378,000 693,000 $1,505,000 1,433,000 Materials Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as ollows. Activity Level Costs Assigned $ 520,000 544,000 Cost Driver Handheld Home Total Number of production runs Quality tests performed Shipping orders processed 30 10 40 13 19 32 140,000 80 60 140 Total overhead $1,204,000

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 34P: Kimball Company has developed the following cost formulas:...