Falcon Crest Corporation manufactures two brands of wine: Regular and Extra Rich Below is the current year production data for the company:

Regular Extra Rich

Direct material in pounds 225,000 110,000

Direct labor hours 45,000 65,000

Machine hours 36,000 24,000

Number of setups 1,450 65,000

Number of gallons produced 450,000 90,000

The 335,000 pounds of material had a total cost of $753,750.Direct labor is $21 per hour. The company has total overhead production costs of $2,212,125. a.If Falcon Crest Corporation applies factory overhead using direct labor hours,compute the total production cost and the unit cost for each brand b.If Falcon Crest Corporation applies factory overhead using machine hours,compute the total production cost and the unit cost for each brand. c.Assume that Falcon Crest Corporation has established the following activity centers,cost drivers,and costs to apply factory overhead.

Cost Pool Cost Driver Cost Volume

Equipment Maintenance # of machine hours $450,000 60,000

Production Setup # of setups $248,625 3,825

Material Handling Pounds of Materials $703,500 335,000

Storage Costs # of gallons produced $810,000 540,000

Compute the total cost and the unit cost for each brand. d.Explain why the unit cost for each model is different across the three methods of overhead application.How can this information benefit the organization?

Question

Falcon Crest Corporation manufactures two brands of wine: Regular and Extra Rich Below is the current year production data for the company:

	Regular	Extra Rich
Direct material in pounds	225,000	110,000
Direct labor hours	45,000	65,000
Machine hours	36,000	24,000
Number of setups	1,450	65,000
Number of gallons produced	450,000	90,000

The 335,000 pounds of material had a total cost of $753,750.Direct labor is $21 per hour. The company has total overhead production costs of $2,212,125. a.If Falcon Crest Corporation applies factory overhead using direct labor hours,compute the total production cost and the unit cost for each brand b.If Falcon Crest Corporation applies factory overhead using machine hours,compute the total production cost and the unit cost for each brand. c.Assume that Falcon Crest Corporation has established the following activity centers,cost drivers,and costs to apply factory overhead.

Cost Pool	Cost Driver	Cost	Volume
Equipment Maintenance	# of machine hours	$450,000	60,000
Production Setup	# of setups	$248,625	3,825
Material Handling	Pounds of Materials	$703,500	335,000
Storage Costs	# of gallons produced	$810,000	540,000

Compute the total cost and the unit cost for each brand. d.Explain why the unit cost for each model is different across the three methods of overhead application.How can this information benefit the organization?

Quizplus · Accepted Answer

The Answer of Falcon Crest Corporation manufactures two brands of wine: Regular and Extra Rich Below is the current year production data for the company:

	Regular	Extra Rich
Direct material in pounds	225,000	110,000
Direct labor hours	45,000	65,000
Machine hours	36,000	24,000
Number of setups	1,450	65,000
Number of gallons produced	450,000	90,000

The 335,000 pounds of material had a total cost of $753,750.Direct labor is $21 per hour. The company has total overhead production costs of $2,212,125. a.If Falcon Crest Corporation applies factory overhead using direct labor hours,compute the total production cost and the unit cost for each brand b.If Falcon Crest Corporation applies factory overhead using machine hours,compute the total production cost and the unit cost for each brand. c.Assume that Falcon Crest Corporation has established the following activity centers,cost drivers,and costs to apply factory overhead.

Cost Pool	Cost Driver	Cost	Volume
Equipment Maintenance	# of machine hours	$450,000	60,000
Production Setup	# of setups	$248,625	3,825
Material Handling	Pounds of Materials	$703,500	335,000
Storage Costs	# of gallons produced	$810,000	540,000

Compute the total cost and the unit cost for each brand. d.Explain why the unit cost for each model is different across the three methods of overhead application.How can this information benefit the organization?

Falcon Crest Corporation Manufactures Two Brands of Wine: Regular and Extra