Subject: Business / Accounting CASE 3A – AUERBACH ENTERPRISES Auerbach Enterprises manufactures air conditioners for automobiles and trucks manufactured throughout North America. The company designs its products with flexibility to accommodate many makes and models of automobiles and trucks. The company’s two main products are MaxiFlow and Alaska. MaxiFlow uses a few complex fabricated parts, but these have been found easy to assemble and test. On the other hand, Alaska uses many standard parts but has a complex assembly and testing process. 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 Costs Radiator parts fabrication………….. $ 80,000 Radiator assembly, weld, and test…. 100,000 Compressor parts fabrication………. 120,000 Compressor assembly and test…….. 180,000 Total $480,000 Machine Hours 10,000 20,000 5,000 45,000 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 Radiator parts fabrication……….. 28 Radiator assembly, weld, and test……. 30 Compressor parts fabrication……… 32 Compressor assembly and test……… 26 Total 116 Alaska 16 74 8 66 164 Required: 1. Compute the departmental overhead rates using machine hours as the cost driver. 2. Compute a company-wide overhead rate using machine hours as the cost driver. 3. Compute the overhead costs per batch of MaxiFlow and Alaska assuming: (a) The company-wide rate. (b) The departmental rates. 4. Compute the total costs per unit of MaxiFlow and Alaska assuming: (a) The company-wide rate. (b) The departmental rates. 5. Is one product affected more than the other by use of departmental rates rather than a company-wide rate? Why or why not? PLACE THIS ORDER OR A SIMILAR ORDER WITH brainy term papers TODAY AND GET AN AMAZING DISCOUNT The post Compute a company-wide overhead rate using machine hours as the cost driver. appeared first on Cheapest Academic Custom Papers.
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