Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 100 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows:
Compute the profit for each product using plantwide allocation.
Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. She asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have had a rate of 50 percent of direct labor cost and Department T would have had a rate of 200 percent of direct labor cost. Recompute the profits for each product using each department
Solution
Answer :-
If overhead charged on Plant wise Allocation :-
Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats . If Overhaed cost charged on Departments allocation rate (Plant wise allocation), then Department B ( Baseball Bats ) more Profitable than Department A (Tennis Rackets ).
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Munoz Sporting Equipment manufactures baseball bats and tennis rackets.docx
1. Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B
produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses
plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation
base. The rate used is 100 percent of direct labor cost. Last year, revenue, materials, and direct
labor were as follows:
Compute the profit for each product using plantwide allocation.
Maria, the manager of Department T, was convinced that tennis rackets were really more
profitable than baseball bats. She asked her colleague in accounting to break down the overhead
costs for the two departments. She discovered that had department rates been used, Department
B would have had a rate of 50 percent of direct labor cost and Department T would have had a
rate of 200 percent of direct labor cost. Recompute the profits for each product using each
department
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B
produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses
plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation
base. The rate used is 100 percent of direct labor cost. Last year, revenue, materials, and direct
labor were as follows:
Solution
Answer :-
If overhead charged on Plant wise Allocation :-
Maria, the manager of Department T, was convinced that tennis rackets were really more
profitable than baseball bats . If Overhaed cost charged on Departments allocation rate
(Plant wise allocation), then Department B ( Baseball Bats ) more Profitable than
Department A (Tennis Rackets ).
Dept. Name Baseball Bats Tennis Rackets
Sales 1580000 1125000
LESS:- Direct Material 564000 293000
2. Direct Labour 320000 160000
Overhead(100% on direct labour cost) 320000 160000
Profit 376000 512000
