Smelly Perfume Company manufactures and distributes several different products The company currenty uses a plant wide allocation method for allocating overhead at a rate of $5 per direct labor hour. Cindy Is the department manager of Department C which produces Products J and P. Department C has $13,200 In traceable overhead Diane is the department manager or Department D which manufactures Product X. Department D has $6,750 in traceable overhead. The product costs (per case of 24 bottles) and other Information are as folows: oducts $60.00 $43.00$29.00 Direct materials Direct labor Overhead 18.90 2.00 12.00 $9700 $7390I$4700 Machine hours (per case) Number of cases (per yea 500 600 If Smelly changes its allocation basis to machine hours, what is the total product cost per case for Product
A $101.20
B $70.00
C $48.15
D $97.00
The Correct Answer and Explanation is :
To determine the total product cost per case for Product X when Smelly Perfume Company switches its overhead allocation to machine hours, follow these steps:
Step 1: Calculate the total overhead cost rate per machine hour
The total traceable overhead is:
[
\text{Total Overhead} = 13,200 (\text{Dept C}) + 6,750 (\text{Dept D}) = 19,950
]
The total machine hours are:
[
\text{Total Machine Hours} = 9,700 (\text{Product J}) + 7,390 (\text{Product P}) + 4,700 (\text{Product X}) = 21,790
]
The overhead rate per machine hour:
[
\text{Overhead Rate} = \frac{\text{Total Overhead}}{\text{Total Machine Hours}} = \frac{19,950}{21,790} = 0.915 \, \text{(per machine hour)}
]
Step 2: Allocate overhead to Product X
For Product X:
[
\text{Overhead for Product X per case} = 0.915 \times 4,700 \, \text{machine hours} \div 500 \, \text{cases} = 8.61 \, \text{(per case)}
]
Step 3: Calculate total product cost per case
The total cost per case for Product X is the sum of direct materials, direct labor, and overhead:
[
\text{Total Product Cost} = \text{Direct Materials} + \text{Direct Labor} + \text{Overhead}
]
Substitute the values:
[
\text{Total Product Cost} = 29.00 + 12.00 + 8.61 = 49.61 \, \text{(per case)}
]
Final Answer:
The correct answer is not listed. Based on calculations, the total product cost per case is $49.61. The closest listed option is C ($48.15), but it does not align exactly with the calculation.
This discrepancy could arise due to rounding or calculation variations in the question source. If clarification or updated data is provided, the result could adjust accordingly.