Auerback Enterprises

BUS 630 Week 2 Assignment

Name

Ashford University

Managerial Accounting

BUS 630

Dr. Barrett

April 14, 2013

Week 2 Assignment

MaxiFlow requires direct materials costs which total $135 per unit, while Alaska’s direct materials requirements total $110 per unit. Direct labor costs per unit are $75 for MaxiFlow and $95 for Alaska.

Auerbach Enterprises uses machine hours as the cost driver to assign overhead costs to the air conditioners. The company has used a company-wide predetermined overhead rate in past years, but the new controller, Bennie Leon, is considering the use of departmental overhead rates beginning with the next year.

The following planning information is available for the next year for each the four manufacturing departments within the company:

Overhead Machine

Costs Hours

Radiator parts fabrication.............. $ 80,000 10,000

Radiator assembly, weld, and test.... 100,000 20,000

Compressor parts fabrication.......... 120,000 5,000

Compressor assembly and test........ 180,000 45,000

Total $480,000 80,000

Normally, the air conditioners are produced in batch sizes of 20 at a time. A production batch of 20 units requires the following number of hours in each department:

MaxiFlow Alaska

Radiator parts fabrication........... 28 16

Radiator assembly, weld, and test....... 30 74

Compressor parts fabrication......... 32 8

Compressor assembly and test......... 26 66

Total 116 164

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|The total overhead cost will be divided between two departments MaxiFlow and Alaska in the ratio of hours consumed. |

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|Particulars...