Trombly Travel Products (TTP) manufactures and sells travel bags and accessories. TTP produces backpacks at its West Street plant. The different backpack models are identified by the primary material used: canvas, nylon, or leather. The company uses a plantwide rate based on direct labor-hours. The plantwide rate is $5.00 per labor-hour. All direct labor at TTP is paid $39 per hour. Canvas and nylon backpacks are produced in Department 1. Leather backpacks are produced in Department 2. The product costs (per backpack) follow. Canvas Nylon Direct materials Direct labor Overhead Machine-hours $34.00 Labor-hours 113.10 Required: A) Compute the total unit cost of each backpack model using the plantwide allocation method. B) The machines in Department 1 are older and almost fully depreciated. The equipment in Department 2 was recently updated and the process in Department 2 is more highly automated. At the request of the manager of Department 1, a cost analyst at TTP provided the following information on overhead costs, machine-hours and direct labor-hours for the two departments. $39.00 132.60 Department 1 $ 87,320 17,800 23,600 Leather $ 49.00 140.40 Department 2 $ 110,080 25,600 12,800 Using labor-hours as the department allocation base for Department 1 and machine-hours as the department allocation base for Department 2, compute the allocation rate for each. C) Compute the unit cost of each model of backpack using the department allocation rates computed in requirement (b) (labor-hours in Department 1 and machine-hours in Department 2).
Trombly Travel Products (TTP) manufactures and sells travel bags and accessories. TTP produces backpacks at its West Street plant. The different backpack models are identified by the primary material used: canvas, nylon, or leather. The company uses a plantwide rate based on direct labor-hours. The plantwide rate is $5.00 per labor-hour. All direct labor at TTP is paid $39 per hour. Canvas and nylon backpacks are produced in Department 1. Leather backpacks are produced in Department 2. The product costs (per backpack) follow. Canvas Nylon Direct materials Direct labor Overhead Machine-hours $34.00 Labor-hours 113.10 Required: A) Compute the total unit cost of each backpack model using the plantwide allocation method. B) The machines in Department 1 are older and almost fully depreciated. The equipment in Department 2 was recently updated and the process in Department 2 is more highly automated. At the request of the manager of Department 1, a cost analyst at TTP provided the following information on overhead costs, machine-hours and direct labor-hours for the two departments. $39.00 132.60 Department 1 $ 87,320 17,800 23,600 Leather $ 49.00 140.40 Department 2 $ 110,080 25,600 12,800 Using labor-hours as the department allocation base for Department 1 and machine-hours as the department allocation base for Department 2, compute the allocation rate for each. C) Compute the unit cost of each model of backpack using the department allocation rates computed in requirement (b) (labor-hours in Department 1 and machine-hours in Department 2).
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 2PB: Five Card Draw manufactures and sells 10,000 units of Aces, which retails for $200, and 8,000 units...
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Transcribed Image Text:Trombly Travel Products (TTP) manufactures and sells travel bags and accessories. TTP produces backpacks at its West
Street plant. The different backpack models are identified by the primary material used: canvas, nylon, or leather. The
company uses a plantwide rate based on direct labor-hours. The plantwide rate is $5.00 per labor-hour. All direct labor at
TTP is paid $39 per hour. Canvas and nylon backpacks are produced in Department 1. Leather backpacks are produced in
Department 2. The product costs (per backpack) follow.
Canvas
Nylon
Direct materials
Direct labor
Overhead
Machine-hours
$34.00
Labor-hours
113.10
$39.00
Required:
A) Compute the total unit cost of each backpack model using the plantwide allocation method.
B) The machines in Department 1 are older and almost fully depreciated. The equipment in Department 2 was recently
updated and the process in Department 2 is more highly automated. At the request of the manager of Department 1, a
cost analyst at TTP provided the following information on overhead costs, machine-hours and direct labor-hours for the
two departments.
132.60
$ 87,320
17,800
23,600
Department 1
Leather
$ 49.00
140.40
Department 2
$ 110,080
25,600
12,800
Using labor-hours as the department allocation base for Department 1 and machine-hours as the department allocation
base for Department 2, compute the allocation rate for each.
C) Compute the unit cost of each model of backpack using the department allocation rates computed in requirement (b)
(labor-hours in Department 1 and machine-hours in Department 2).
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