MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 10,000 units of M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues and costs: MTI Income Statement M3100 M4 100 M6100 Total Sales revenue. Direct costs Direct materials. $9,000,000 $15,000,000 $13,500,000 $37,500,000 3,000,000 600,000 4,500,000 900,000 3,300,000 10,800,000 1,800,000 Direct labor. Variable overhead Setting up machines..... Processing sales orders... Warehousing.. Operating machines Shipping.... Contribution margin.. Plant administration 3,300,000 2,400,000 1,800,000 2,400,000 1,200,000 900,000 $14,700,000 6,000,000 Gross profit .... $ 8,700,000 MTI's controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following: Activity Cost Driver M3100 M4100 M6100 Setting up machines..... Processing sales orders. Warehousing..... Operating machines Shipping.. Production runs Sales orders received Units held in inventory Machine-hours Units shipped 10 20 20 180 400 220 100 200 100 6,000 9,000 10,000 10,000 17,500 10,000 The employee team recommends that plant administration costs not be allocated to products.
MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 10,000 units of M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues and costs: MTI Income Statement M3100 M4 100 M6100 Total Sales revenue. Direct costs Direct materials. $9,000,000 $15,000,000 $13,500,000 $37,500,000 3,000,000 600,000 4,500,000 900,000 3,300,000 10,800,000 1,800,000 Direct labor. Variable overhead Setting up machines..... Processing sales orders... Warehousing.. Operating machines Shipping.... Contribution margin.. Plant administration 3,300,000 2,400,000 1,800,000 2,400,000 1,200,000 900,000 $14,700,000 6,000,000 Gross profit .... $ 8,700,000 MTI's controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following: Activity Cost Driver M3100 M4100 M6100 Setting up machines..... Processing sales orders. Warehousing..... Operating machines Shipping.. Production runs Sales orders received Units held in inventory Machine-hours Units shipped 10 20 20 180 400 220 100 200 100 6,000 9,000 10,000 10,000 17,500 10,000 The employee team recommends that plant administration costs not be allocated to products.
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 12EB: Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes...
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