Holly Manufacturing Company produces two cello models. One is a standard acoustic cello that sells for $600 and is constructed from medium-grade materials. The other model is a custom-made amplified cello with pearl inlays and a body constructed from special woods. The custom cello sells for $900. Both cellos require 10 hours of direct labor to produce, but the custom cello is manufactured by more experienced workers who are paid at a higher rate. Most of Holly’s sales come from the standard cello, but sales of the custom model have been growing. Following is the company’s sales, production, and cost information for last year: Cello Standard Custom Sales and production volume in units 900 100 Unit Selling Price $600.00 $900.00 Unit costs: Direct materials $150.00 $375.00 Direct labor $180.00 $240.00 Manufacturing overhead* $135.00 $135.00 Total unit costs $465.00 $750.00 Unit Gross Profit $135.00 $150.00 Direct Labor Hours $10.00 10.00 Direct Labor Rate Per Hour $18.00 $24.00 *Manufacturing overhead costs: Building depreciation $ 40,000 Maintenance 15,000.00 Purchasing 20,000.00 Inspection 12,000.00 Indirect materials 15,000.00 Supervision 30,000.00 Supplies 3,000.00 Total manufacturing overhead costs $135,000.00 These manufacturing overhead costs are fixed in nature: they do not vary with the volume of manufacturing activity. The company allocates overhead costs using the traditional method. Its activity base is direct labor hours. The predetermined overhead rate, based on 10,000 direct labor hours, is $13.50 ($135,000 ÷ 10,000 direct labor hours). Johann Brahms, president of Holly, is concerned that the traditional cost-allocation system the company is using may not be generating accurate information and that the selling price of the custom cello may not be covering its true cost. Questions To Be Answered 1. The cost-allocation system Holly has been using allocates 90% of overhead costs to the standard cello because 90% of direct labor hours were spent on the standard model. How much overhead was allocated to each of the two models last year? Discuss why this might not be an accurate way to assign overhead costs to products. 2. How would the use of more than one cost pool improve Holly’s cost allocation? Use the data below for the questions which follow. Holly’s controller developed the following data for use in activity-based costing: 3. Use activity-based costing to allocate the costs of overhead per unit and in total to each model of cello. 4. Calculate the cost of a custom cello using activity-based costing. 5. Why is the cost different from the cost calculated using the traditional allocation method? 6. At the current selling price, is the company covering its true cost of production? Briefly discuss 7. What should Holly Manufacturing do about the situation? 8. What should Holly Manufacturing do if the quantity of custom cellos sold at the new price falls to 50 per year? 9. What should Holly Manufacturing do about the situation if the price of the custom cello cannot exceed $900? 10. At a selling price of $1,000 each, what is the breakeven unit volume for the custom cello? 11. What are the lessons learned from this case?
Why Hire a Professional Essay Writer from essayprohire
The quality of an essay is important
If you want to be successful in the essay writing world, it’s important to make sure that the quality of your work is high. A professional essay writer from us will be able to provide you with high-quality papers, and they will also have the experience necessary to write effective essays. This means that you won’t have to worry about any errors or problems with your essays – they will be perfect.
Our Customer service is top-notch
If you have a problem with your essay, or if you just need a little help writing it, then you should contact our customer service. Our customer service is always available to help you with whatever you need – from getting your essay correct to helping you with the grammar and punctuation. We’re here to help, so don’t hesitate to call us today!
Our offer on Unlimited Revisions
If you're looking for essaywriting help, then you should definitely consider getting help from a essaywritinghelpnow. However, if you're not sure what you need or whether you have the time or resources to do the research yourself, then you might want to consider getting unlimited revisions done by our team of experts. O
Our guarantee to Confidentiality
We understand the importance of confidentiality, and we will never share your personal information with anyone without your permission. That’s why we offer a one-year guarantee that your essays will remain confidential. If you decide that you no longer want us to write your essays, we will still respect your privacy and will destroy all the evidence that we had of your work.
We believe that it is important to have a reliable and trustworthy essaywriter. That’s why we offer a 100% satisfaction guarantee on all of our essays. We take the time to get to know our clients, and we will always make sure that our essays are of the highest quality. We understand that not everyone is happy with their first essay, so we want to make sure that you’re always satisfied with the results of our work.
Our punctuality and quality
At our company, we pride ourselves on our punctuality and quality. We understand that it can be difficult to get essays written on time, and we’re here to help you out! Our writers are always available to help you with your essay, and we guarantee that you’ll receive the best possible product. We also have a strict no-nonsense policy when it comes to plagiarism, so you can be sure that your essay will be of the highest quality.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
So much stress and so little time? Take care of yourself: let us help you with your tasks. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission and Business Papers
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Editing and Proofreading
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.