100 points, total.For partial credit, formulas and work, appropriately labeled, must be shown.
Moyer Petrochemical Company produces three products. Budgeted sales quantities, target prices and actual prices for 2014 are shown below:
Product Sales Quantity Target Price Actual Price Difference
X 500 199.50 300.00 100.50
Y 1,000 $279.00 $280.00 $ 1.00
Z 5,000 294.00 250.00 (44.00)
The firm sets the target price at 150% of the product’s total manufacturing cost. The firm was able to sell Product X at a higher price than the target, but was unable to achieve the target price on Product Z. Susan Moyer, CEO, wants to promote Product Xmuch more aggressively and phase out Product Z because she believes that this information suggests that Product X has the greatest potential among the firm’s three products since the actual selling price of Product X was about 50% higher than the target price.
The direct materials and direct labor costs per unit for each product are:
Product X Product Y Product Z
Direct materials $65.00 $50.00 $114.40
Direct labor 10.00 20.00 12.00
Total direct cost $75.00 $70.00 $126.40
Both the budgeted and actual total manufacturing overhead costs for 2014were $493,000. The firm uses direct labor dollars to assign manufacturing overhead costs to products. Budgeted and actual units sold were the same for each product.
1. Compute the overhead allocation rate using Moyer Petrochemical Company’s traditional costing system. [10 points]
$5.80/ Direct labor dollar = $493,000/($20×1,000+$12×5,000+$10×500)……………………………………………………..total 10 problem