Ellis Perry is an electronics components manufacturer. Information about the company’s two products follows: AM-2 FM-9 Units produced 20,000 4,000 Direct labor hours required for production 10,000 15,000 Units per batch 4,000 400 Shipping weight per unit 0.50 lbs. 10 lbs. The company incurs $840,000 in overhead per year and has traditionally applied overhead on the basis of direct labor hours. Assume that Ellis Perry has identified three activity cost pools. Pool Cost Cost Driver Assembly $630,000 Direct labor hours Setup 30,000 Number of setups (1 per batch) Packaging 180,000 Weight (i) Given these activity pools and cost drivers, how much overhead should be allocated to each product? (Round per unit rates to 2 decimal places, e.g. 3.54 and final answers to 0 decimal places, e.g. 45,286.) AM-2 FM-9 Total allocated overhead
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Ellis Perry is an electronics components manufacturer. Information about the company’s two products follows:
|
AM-2
|
FM-9
|
||||
|---|---|---|---|---|---|
|
Units produced
|
20,000 | 4,000 | |||
|
Direct labor hours required for production
|
10,000 | 15,000 | |||
|
Units per batch
|
4,000 | 400 | |||
|
Shipping weight per unit
|
0.50 | lbs. | 10 | lbs. |
The company incurs $840,000 in
Assume that Ellis Perry has identified three activity cost pools.
|
Pool
|
Cost
|
Cost Driver
|
||
|---|---|---|---|---|
|
Assembly
|
$630,000 | Direct labor hours | ||
|
Setup
|
30,000 | Number of setups (1 per batch) | ||
|
Packaging
|
180,000 | Weight |
| (i) | Given these activity pools and cost drivers, how much overhead should be allocated to each product? (Round per unit rates to 2 decimal places, e.g. 3.54 and final answers to 0 decimal places, e.g. 45,286.) |
|
|
AM-2
|
FM-9
|
||
|---|---|---|---|---|
|
Total allocated overhead
|
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