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Frames, Inc. X-MBA 18 1/2546. 4502010137 4502010343 4502010384 4502010111 4502010012 4502010459 4502010665 4502010103 4502010756 4502010624 4502010095.

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Presentation on theme: "Frames, Inc. X-MBA 18 1/2546. 4502010137 4502010343 4502010384 4502010111 4502010012 4502010459 4502010665 4502010103 4502010756 4502010624 4502010095."— Presentation transcript:

1 Frames, Inc. X-MBA 18 1/2546

2 4502010137 4502010343 4502010384 4502010111 4502010012 4502010459 4502010665 4502010103 4502010756 4502010624 4502010095 4502010319

3 Frames, Inc. n Manufactures 2 types of metal frames –Large –Small n Process Cut steel angle iron to appropriate size Welded together to form the frame Which - involved a high degree of automation. - have considerable indirect labor by skilled technicians and engineers who maintain the automated equipment. * Has 2 Manufacturing departments: - Cutting - Welding

4 Actual costs of production for the year

5 Total Cost Calculation Question: A., B. and C. - To compute the unit costs of large frames and small frames

6 A. Allocate overhead cost based on direct labor cost I. Compute allocated overhead costs

7 II. Compute total cost by adding Overhead cost from I into worksheet. III. Compute the unit costs of large frames and small frames.

8 B. Allocate overhead cost using different OH rate : - Utilities & Indirect labor cost based on kilowatt-hours. - General factory costs based on direct costs (DM + DL) I. Compute allocated overhead costs

9 II. Compute total cost by adding Overhead cost from I into worksheet.

10 III. Compute the unit costs of large frames and small frames.

11 C. Allocate overhead cost using departmental OH rates : - Cutting Dept :allocated based on direct materials costs. - Welding Dept : allocated based on kilowatt-hours in Welding Dept. I. Calculate overhead costs for both Cutting & Welding Dept. Divided between two departments

12 II. Compute allocated overhead costs for Cutting Department based on direct materials costs. III. Compute allocated overhead costs for Welding Department based on kilowatt-hours in the Welding Dept.

13 IV. Compute total overhead costs for large frames and small frames. V. Compute total costs by adding Overhead cost from IV into worksheet.

14 III. Compute the unit costs of large frames and small frames.

15 D. Analyze the different unit costs from each allocation methods and which method is best ? n Unit cost of large frames increase while unit cost of small frame decrease when using more different allocation base. n Allocation base is the factor which effect to the overhead costs of products and then to the product unit costs. n Using of departmental overhead rates is also effect to the product unit costs.

16 Which method is best ? n Method C is the best method because: –Concerns both allocation base and departmental overhead rates for cutting and welding dept. –The allocation bases for each dept. are the appropriate ones. Cutting Dept.:Direct Materials Costs Welding Dept.:Kilowatt-hours in the Welding Dept.

17 Question and Answers


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