Nash Company Manufactured Two Products, a and B, During April

question 32

Essay

Nash Company manufactured two products, A and B, during April. For purposes of product costing, an overhead rate of $2.50 per direct-labor hour was used, based on budgeted annual factory overhead of $500,000 and 200,000 budgeted annual direct-labor hours, as follows:
$\begin{array}{llr}& \text { Budgeted} & \text { Budgeted }\\ &\text {Overhead } & \text { Hours }\\ \text {Department 1 } &\$ 300,000 & 100,000 \\ \text { Department 2 } &200,000 &100,000 \\ \text { Total } &\$ 500,000 & 200,000\\\end{array}$

The number of labor hours required to manufacture each of these products was:
$$\begin{array} { l c c } & \text { Product A } & \text { Product B } \\\text { Department 1 } & \mathbf { 3 } & 1 \\\text { Department 2 } & 1 & \mathbf { 3 } \\\text { Total } & 4 & 4\end{array}$$
During April, production units for products A and B were 1,000 and 3,000, respectively.
Required:
(a) Using a plant-wide overhead rate, what are total overhead costs assigned to products A and B, respectively?
(b) Using departmental overhead rates, what are total overhead costs assigned to products A and B, respectively?
(c) Assume that materials and labor costs per unit of Product A are $10 and that the selling price is established by adding 40% of absorption costs to cover profit and selling and administrative expenses. What difference in selling price would result from the use of departmental overhead rates?

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Definitions:

Data Transmission

The process of transferring data between devices or components in a computer network.

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A business approach that involves identifying and executing tactics to outperform competitors in the market and achieve superior positioning.

Anticipate and Counter

This refers to the strategy of predicting potential challenges or objections and preparing responses or solutions in advance.

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