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ACCT 556 Week 1 Homework Problems

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ACCT 556 Week 1 Homework
The new president of the Wernecke Company was stumped. Why had
profits gone down? He had directed the sales department to push the
product with the highest contribution margin, and the sales
department had come through with flying colors. The percent of flams
sold had increased from 25% of units sold to 37.5% of units sold. So
what happened?
Required:
1. Calculate the Wernecke Company’s estimated direct labor hours to
produce flims and flams.
2. Calculate the predetermined variable overhead rate that will be used
in the coming year using a traditional costing system based upon
direct labor hours.
3. Using a traditional costing system based upon direct labor hours,
compute the unit product costs for flims and flams as well as
contribution margin per unit.
4. It has been suggested to the president to consider the use of an ABC
costing system to allocate manufacturing overhead. Engineering
studies have revealed the following information about estimated
manufacturing activities for the coming year.
Calculate the separate predetermined overhead rates for each of the
activities listed above.