Executive Images Corporation Produces Two Types of Wooden Bookends: Plain

question 32

Essay

Executive Images Corporation produces two types of wooden bookends: plain and hand-carved. The following information about the production process is available:
Total factory overhead is $1,200,000. Of this overhead, $500,000 is related to utilities and the remainder is related to quality control.
a. Determine the total overhead cost assigned to each type of bookend using machine hours as the allocation base. Calculate the gross profit per unit for each product.
b. Determine the total overhead cost assigned to each type of bookend if overhead is assigned using allocation bases appropriate to the overhead costs. Calculate the gross profit per unit of each product.
c. Explain why the unit cost for each model is different between the two methods of allocation.

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Definitions:

Molecule

The smallest particle of a chemical element or compound that can exist independently while retaining the characteristics of the substance.

Cellulose

A complex carbohydrate that constitutes the primary structural component of plant cell walls and is indigestible to humans.

Plant Cuticles

A protective, waxy coating on the surface of stems and leaves that prevents water loss.

Water Loss

The process by which water leaves a body or system, typically through evaporation, excretion, or perspiration.