MBA560 Financial and Managerial Accounting Module 6 Test (2 Problems)

MBA560 Financial and Managerial Accounting
Module 6 Test

Problem 1.
The following information is for a product manufactured and sold by Rivera Corporation: Sales price per unit 30 Variable cost per unit 20 Total fixed costs 200,000 Last year, Rivera earned a profit of $60,000

Required:
1) How many units did Rivera sell last year?
2) Rivera's managers are considering decreasing the sales price to $28 in an effort to increase market share. Also, the company wants a profit of $80,000. How many units would it have to sell at the lower selling price to achieve this target?

Problem 2.
The management accountant at Melrose, Inc. provided the following estimated costs for producing 5,000 units of a specialty product manufactured by the firm: Direct Materials 10,000 Direct Labor (1 hour per unit) 50,000 Unit level support costs 10,000 Batch level support costs 5,000 Product level support costs 3,000 Facility level support costs 7,000 The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product.

Required:
1) Compute the predetermined overhead rate for this company.
2) Compute the specialty product's total estimated cost per unit.
3) Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs?
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