| Company makes two models of children’s playhouses, the Castle and the Mansion. |
| Basic production information follows: |
| Castle | Mansion | |||||
| Direct materials cost per unit | $ | 35 | $ | 63 | ||
| Direct labor cost per unit | 21 | 36 | ||||
| Sales price per unit | 357 | 572 | ||||
| Expected production per month | 760 | units | 420 | units | ||
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| Landon has monthly overhead of $194,915, which is divided into the following cost pools: |
| Setup costs | $ | 83,300 |
| Quality control | 67,415 | |
| Maintenance | 44,200 | |
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| Total | $ | 194,915 |
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| The company has also compiled the following information about the chosen cost drivers: |
| Castle | Mansion | Total | |
| Number of setups | 35 | 63 | 98 |
| Number of inspections | 320 | 375 | 695 |
| Number of machine hours | 1,100 | 1,500 | 2,600 |
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| Requirement 1: |
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Suppose Landon used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each |
| Overhead assigned | ||
| Castle Model: | $ | |
| Mansion Model: | $ | |
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| Total Overhead Cost | $ | |
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| Requirement 2: |
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Calculate the production cost per unit for each of Landon’s products under a traditional costing system. (Round your |
| Castle | Mansion | |
| Unit cost | $ | $ |
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| Requirement 3: |
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Calculate Landon’s gross margin per unit for each product under the traditional costing system. (Round your intermediate |
| Castle | Mansion | |
| Gross margin | $ | $ |
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| Requirement 4: |
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Select the appropriate cost driver for each cost pool and calculate the activity rates if Landon wanted to implement an ABC system. |
| Setup Costs | $ | ||
| Quality Control | $ | ||
| Maintenance | $ | ||
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| Requirement 5: |
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Assuming an ABC system, assign overhead costs to each product based on activity demands . (Omit the “$” sign in your |
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Overhead Assigned To Castle |
Overhead Assigned To Mansion |
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| Setup Cost | $ | $ | ||
| Quality Control | $ | $ | ||
| Maintenance | $ | $ | ||
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| Total Overhead Cost | $ | $ | ||
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| Requirement 6: |
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Calculate the production cost per unit for each of Landon’s products in an ABC system. (Round your intermediate |
| Castle | Mansion | |
| Unit cost | $ | $ |
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| Requirement 7: |
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Calculate Landon’s gross margin per unit for each product under an ABC system. (Round your intermediate calculations and |
| Castle | Mansion | |
| Gross margin | $ | $ |
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