- Costume Kings has two product lines: machine-made costumes and hand-made costumes. The company assigns Birr 80,000 in manufacturing overhead costs to two cost pools; power costs and inspection costs. Of this amount, the power cost pool has been assigned Birr 32,000 and the inspection cost pool has been assigned Birr 48,000. Additional information about each product line is shown below.
Machine-Made Hand-Made
Sales Revenue Birr 240,000 Birr 160,000
Direct Labour and Materials Cost 120,000 96,000
Units produced and sold 48,000 16,000
Machine hours 96,000 4,000
Square feet of production space 1,200 800
Material orders received 150 100
Quality control inspection hours 2,000 500
Required:
- Allocate the manufacturing overhead from the activity cost pools to each product line. Use what you believe are the most appropriate and significant cost drivers from the information provided.
- Compute the cost per unit of machine-made costumes and hand-made costumes.
On a per unit basis, which product line appears to be the most profitable? Explain
Categories: