madolfo ltd manufactures two products following is a production and cost analysis fo 641324

(ABC) Madolfo Ltd. manufactures two products. Following is a production and cost analysis for each product for 2010:

Cost Component Don't use plagiarized sources. Get Your Custom Essay on madolfo ltd manufactures two products following is a production and cost analysis fo 641324 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Order Essay	Product A	Product B	Both Products	Cost
Units produced	10,000	10,000	20,000
Raw material used (units)
X	50,000	50,000	100,000	$800,000
Y		100,000	100,000	$200,000
Labor hours used
Department 1				$682,000
Direct labor	20,000	5,000	25,000	$375,000
Indirect labor
Inspection	2,500	2,400	4,900
Machine operations	5,000	10,000	15,000
Setups	252	248	500
Department 2				$462,000
Direct labor	5,000	5,000	10,000	$200,000
Indirect labor
Inspection	2,680	5,000	7,680
Machine operations	1,000	3,860	4,860
Setups	250	310	560
Machine hours used
Department 1	5,000	10,000	15,000	$400,000
Department 2	5,000	20,000	25,000	$800,000
Power used (kW hours)				$400,000
Department 1			1,500,000
Department 2			8,500,000
Other activity data
Building occupancy				$1,000,000
Purchasing				$100,000
Number of purchase orders
Material X			200
Material Y			300
Square feet occupied
Purchasing			10,000
Power			40,000
Department 1			200,000
Department 2			250,000

Kevin Sharp, the firm’s cost accountant, has just returned from a seminar on activity based costing. To apply the concepts he has learned, he decides to analyze the costs incurred for Products A and B on an activity basis. In doing so, he specifies the following first and second allocation processes:

FIRST STAGE: ALLOCATIONS TO DEPARTMENTS

Cost Pool	Cost Object	Activity Allocation Base
Power	Departments	Kilowatt hours
Purchasing	Material	Number of purchase orders
Building occupancy	Departments	Square feet occupied

SECOND STAGE: ALLOCATIONS TO PRODUCTS

Cost Pool	Cost Object	Activity Allocation Base
Departments Indirect labor	Products	Hours worked
Power	Products	Machine hours
Machinery related	Products	Machine hours
Building occupancy	Products	Machine hours
Material purchasing	Products	Materials used

a. Determine the total overhead for Madolfo Ltd.

b. Determine the plantwide overhead rate for the company, assuming the use of direct labor hours.

c. Determine the cost per unit of Product A and Product B, using the overhead rate found in (b).

d. Determine the cost allocations to departments (first-stage allocations). Allocate costs from the departments in the following order: building occupancy, purchasing, and power. Finish the cost allocations for one department to get an “adjusted” cost to allocate to the next department.

e. Using the allocations found in (d), determine the cost allocations to products(second-stage allocations).

f. Determine the cost per unit of Product A and Product B using the overhead allocations found in (e).

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