Gentry Cabinetry Produces Two Models of Home Shelving, the Basic

question 4

Essay

Gentry Cabinetry produces two models of home shelving, the Basic and the Mega. Data on operations and costs for November are:
$\begin{array}{lrrr}&\text { Basic } & \text { Mega } & \text { Total }\\ \text { Machine hours } & 8,000 & 4,000 & 12,000 \\\text { Direct labor hours } & 6,000 & 4,000 & 10,000 \\\text { Units produced } & 1,000 & 250 & 1,250\\\text { Direct material costs } & \$ 20,000 & \$ 7,500 & \$ 27,500 \\\text { Direct labor costs } & 129,000& 71,000 & 200,000\\\text { Manufacturing overhead costs}&&&348,200\\\text { Total costs}&&&\$575,700\end{array}$

Required:
Compute the predetermined overhead rate, assuming Gentry Cabinetry uses:
(a) Direct labor hours to allocate overhead costs.
(b) Direct labor costs to allocate overhead costs.
(c) Machine hours to allocate overhead costs.
(d) Compute the unit cost for each model using direct labor costs to allocate overhead.

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Definitions:

Crossover Rate

The discount rate at which two investment projects have the same Net Present Value (NPV), often used in capital budgeting.

Projects

Specific tasks or initiatives undertaken to achieve a particular goal, often requiring a significant amount of planning and work.

IRR Cross-Over Rate

The rate at which two projects have the same net present value (NPV) when considering their internal rate of return (IRR), used to choose between competing projects.

Annual Cash Flow

The total amount of money being transferred into and out of a business, measured yearly.