Management & Cost Accounting Case Study : Assignment

The Jackson Company has always allocated all overhead costs to products based upon the number of units produced. Over the years overhead costs have grown enormously and the firm’s profits have been falling. During this same time the firm has substantially broadened the lines of products it produces.
Jackson Company produces four Products of, J-275, R-895, T-28A and Y-477.
During the past year overhead amounted to RMB1.65 million. A report reveals that RMB350,000 of this is primarily depreciation on buildings and equipment, heat, light, and similar common costs. The remaining RMB1,300,000 is primarily for salaries for people who manage the flow of production, production schedulers, expeditors, equipment setup workers, and others needed to modify production lines whenever a department switches from manufacturing one type of product to another.

The following historical records have been developed for these production expeditors.

OVERHEAD: RMB 1,650,000

DEPRECIATION: RMB 350,000

SALARIES: RMB 1,300,000

The production in 2020 and the Direct Costs incurred for a small sample of the firm’s products are summarised below:

Required

a. Develop the cost of each 4 Products using the firm’s current (2020) Allocation Base.

b. Develop two allocation bases, one spreading common costs over units produced and a second spreading production expediting costs over product lines. Determine the cost of each 4 Products using these two new rates.

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