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Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for nego- tiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happen- ing in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $180,000. During that time, the company produced 8,000 units of Model SF-08 and 2,000 units of Model SF-48. The direct costs of produc- tion were as follows: in sar Direct materials Direct labor (3100 Irin SF-08 5-65 to SF-48 Total Ensin tumot sesing to 100 od usurmo $160,000 120,000 $90,000 80,000 $250,000 200,000 enibo lanciibsT wer bozell-in 1-2 Management determined that overhead costs are caused by three cost drivers. These drivers and yalesoning inna their costs for last month were as follows: trong and tort zovsiled an Activity Level

Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. Although sales remain reasonably strong, managers at SFG have noticed that the company is meeting more resistance to the pricing for SF-08, although there seems to be little need for nego- tiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happen- ing in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $180,000. During that time, the company produced 8,000 units of Model SF-08 and 2,000 units of Model SF-48. The direct costs of produc- tion were as follows: in sar Direct materials Direct labor (3100 Irin SF-08 5-65 to SF-48 Total Ensin tumot sesing to 100 od usurmo $160,000 120,000 $90,000 80,000 $250,000 200,000 enibo lanciibsT wer bozell-in 1-2 Management determined that overhead costs are caused by three cost drivers. These drivers and yalesoning inna their costs for last month were as follows: trong and tort zovsiled an Activity Level

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 13MC: Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours...
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Required How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? a. b. C. Chapter 9 Activity-Based Costing How much of the overhead will be assigned to each product if direct labor cost is used to allo- cate overhead? What is the total cost per unit produced for each product? Draft a memo for the marketing manager explaining why the SF-08 might be experiencing resistance in the market along with your recommendation for which costing system to use. Jeop rode! fo910 Minit Dosed Costing in a Service Environment (LO 9-3, 4, 5)
Transcribed Image Text:Required How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? a. b. C. Chapter 9 Activity-Based Costing How much of the overhead will be assigned to each product if direct labor cost is used to allo- cate overhead? What is the total cost per unit produced for each product? Draft a memo for the marketing manager explaining why the SF-08 might be experiencing resistance in the market along with your recommendation for which costing system to use. Jeop rode! fo910 Minit Dosed Costing in a Service Environment (LO 9-3, 4, 5)
(LO 9-4, 5, 6) 9-42. Activity-Based Costing versus Traditional Costing Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. is Although sales remain reasonably strong, managers at SFG have noticed that the company meeting more resistance to the pricing for SF-08, although there seems to be little need for nego- tiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happen- ing in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $180,000. During that time, the company produced 8,000 units of Model SF-08 and 2,000 units of Model SF-48. The direct costs of produc- tion were as follows: Direct materials Direct labor.. ********* her remol - 10 SF-08 SF-48 lasin temot lesing CB lo Rood O $90,000 80,000 $160,000 120,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: d Enimuoos word ni od idaiar moldong si ted 201 Cost Driver ubong of baschs70 gal Direct materials costs........70 $50,000 Number of production runs Number of inspections beton 54,000 Total overhead Overhead Costs SF-08 Activity Level SF-48 Total $160,000 $90,000 $250,000 dal 20 40 60 12 8 11 19 T 76,000al $180,000 Total $250,000 200,000 PAL
Transcribed Image Text:(LO 9-4, 5, 6) 9-42. Activity-Based Costing versus Traditional Costing Shady Fabrication Group (SFG) manufactures components for manufacturing equipment at several facilities. The company produces two, related, parts at its Park River Plant, the models SF-08 and SF-48. The differences in the models are the quality of the materials and the precision to which they are produced. The SF-48 model is used in applications where the precision is critical and thus requires greater oversight in the production process. is Although sales remain reasonably strong, managers at SFG have noticed that the company meeting more resistance to the pricing for SF-08, although there seems to be little need for nego- tiation on the price of the SF-48 model. As a result, the marketing manager at SFG has asked the financial staff to review the costs of the two products to understand better what might be happen- ing in the market. Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $180,000. During that time, the company produced 8,000 units of Model SF-08 and 2,000 units of Model SF-48. The direct costs of produc- tion were as follows: Direct materials Direct labor.. ********* her remol - 10 SF-08 SF-48 lasin temot lesing CB lo Rood O $90,000 80,000 $160,000 120,000 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last month were as follows: d Enimuoos word ni od idaiar moldong si ted 201 Cost Driver ubong of baschs70 gal Direct materials costs........70 $50,000 Number of production runs Number of inspections beton 54,000 Total overhead Overhead Costs SF-08 Activity Level SF-48 Total $160,000 $90,000 $250,000 dal 20 40 60 12 8 11 19 T 76,000al $180,000 Total $250,000 200,000 PAL
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