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The Messenger Fones Company designs and manufactures cellphones. The company currently off

The Messenger Fones Company designs and manufactures cellphones. The company currently off

The Messenger Fones Company designs and manufactures cellphones. The company currently offers two models; the T328 and theSS356. The company has three operating departments: design,engineering and production. In the past, the company has beenallocating the manufacturing overhead based on machine hours.However, Kayla Rined, the product manager of T328, has a hunch thattheir current method of using only machine hours as a costallocation base is resulting in the allocation of too much overheadcosts to her product. She has proposed that the company use the ABCsystem to cost products.

In 2010, the actual manufacturing overhead was $211,000. Thefollowing indicates the total amount of machine hours used for theproduction of each cell phone model in 2010.

 

Machine Hours

T328

2,400 hours

SS356

2,500 hours

Total Machine Hours

4,900 hours

 

Do not enter dollar signs or commas in the input boxes.

a) Calculate the manufacturing overhead cost allocation rate usingmachine hours.

Round your answers to 2 decimal places.

Manufacturing overhead cost allocation rate: $Answer

b) Determine the manufacturing overhead allocated to each modelusing the manufacturing overhead cost allocation rate determined inpart (a).

Round your answers to the nearest whole number.

T328: $Answer

SS356: $Answer

c) The Messenger Fones Company is considering changing theircosting system by tracing manufacturing overhead costs to the threeoperating activities. The following is the amount of manufacturingoverhead costs traceable to the designing, engineering andproduction activities.

Operating Areas

Cost Drivers

Total Costs

Designing

Number of design hours

$73,000

Engineering

Number of engineering hours

$51,000

Production

Number of machine hours

$61,000

Total

 

$185,000

 

The total cost allocation units used for each product line are:

Cost Allocation Base

T328

SS356

Total

Design hours

1,400

1,900

3,300

Engineering hours

1,700

2,100

3,800

Machine hours

2,400

2,500

4,900

 

Determine the manufacturing overhead rate for each activity. Inaddition, use the manufacturing overhead rates to calculate theallocated overhead for each model.

Round your answers to 2 decimal places.

Manufacturing overhead rates

Designing

$Answer

Engineering

$Answer

Production

$Answer

   

 

Round your answers to the nearest whole number.

Manufacturing Overhead

T328

$Answer

SS356

$Answer

   

 

d) Was Kayla Rined's hunch about the allocation of too muchoverhead costs to her product right? AnswerNoYes

Round your answers to the nearest whole number.

Under-allocation / Over-allocation: $Answer

Abhinav 02-Dec-2019

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