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Calculate Car Manufacturing Plant Problem

? Calculate the overhead allocation rate (i.e. burden rate) for each of the model years 1988 through 1990.
1987 1988 1989 1990
Sales
Fuel Tanks 70,278 75,196 79,816 83,535
Manifolds 79,459 84,776 89,323 93,120
Doors 41,845 45,174 47,199 49,887
Muffler/Exhausts 62,986 66,266 0 0
Oil Pans 75,586 79,658 0 0
Total 330,154 351,071 216,338 226,542

Direct Material
Fuel Tanks 15,125 15,756 16,312 16,996
Manifolds 31,696 33,016 34,392 35,725
Doors 14,886 15,506 16,252 16,825
Muffler/Exhausts 28,440 29,525 0 0
Oil Pans 32,218 33,560 0 0
Total 122,365 127,363 66,956 14,102

Direct Labor
Fuel Tanks 4,169 4,238 4,415 4,599
Manifolds 5,886 6,027 6,278 6,540
Doors 2,621 2,731 2,844 2,963
Muffler/Exhausts 5,635 5,766 0 0
Oil Pans 6,371 6,532 0 0
Total 24,682 25,294 13,537 14,102

1000 7,713 7,806 5,572 5,679
1500 6,743 6,824 5,883 5,928
2000 3,642 3,794 2,031 2,115
3000 2,428 2,529 1,354 1,410
4000 8,817 8,888 7360 7,410
5000 24,181 24,460 20,063 20,274
8000 5,964 5,946 3,744 3,744
9000 6,708 6,771 5,948 5,987
11000 5,089 5,011 3,150 3,030
12000 26,936 28,077 15,027 15,683
14000 9,733 9784 8,025 8,110
Total 107,954 109,890 78,157 79,393
Factory Profit 75,153 88,524 57,688 63,501

? Consider two products in the same product line. Below is their budgeted selling price and costs.
Product 1 Product 2
Expected selling price \$ 62 \$54
Direct material cost 16 27
Direct Labor cost 6 3

Calculate the expected gross margin as a % of selling price on each product based on the 1988 and 1990 model year budgets, assuming selling price and material and labor cost do not change from standard.

SOLUTION This solution is FREE courtesy of BrainMass!

Please find tutorial and help for car manufacturing plant in the attached file.

Car Manufacturing Plant

The overhead allocation rate can be calculated by the following formula.
Two types of allocation bases are used for calculating overhead allocation rate that are as follow.
• Direct material cost
• Direct labor cost
The total overhead cost, direct material cost, and direct labor cost are shown in the following table.
Year 1988 1989 1990
Direct Material Cost 127363 66956 69546
Direct Labor Cost 25294 13537 14102

On the basis of direct material:
= 109890/127363
= 0.86
On the basis of direct labor:
= 109890/25294
= 4.34
On the basis of direct material:
= 78157/66956
= 1.17
On the basis of direct labor:
= 78157/13537
= 5.77
On the basis of direct material:
= 79393/69546
= 1.14
On the basis of direct labor:
= 79393/14102
= 5.63
Assumption:
Overhead cost is a total overhead cost for all account number. Direct material cost is a total of various cots that includes fuel tanks, manifolds, doors, muffler/exhausts and oil pans. Direct labor cost is a total of various cots that includes fuel tanks, manifolds, doors, muffler/exhausts and oil pans.
Calculation of Expected Gross Margin
The gross margin can be calculated by using the following formula.
= Expected Gross profit/Expected selling price
The gross profit can be calculated by the following formula.
= Sales - Total Cost (Direct Material + Direct Labor)
Calculation of Gross Profit Margin (in 1988):
For product 1:
Sales = \$62
Total cost =16 + 6
= \$22
Then, gross profit will be -
Gross profit = 62 - 22
= \$40
Gross profit margin = [(40/62) * 100]
= 64.5%
For product 2:
Sales = \$54
Total cost is the total of direct material coat plus direct labor cost
=27 + 3
= \$30
Then, gross profit will be -
Gross profit = 54 - 30
= \$24
Gross profit margin = [(24/54) * 100]
= 44.4%
Calculation of gross profit margin in 1990:
For product 1:
Sales = \$62
Total cost =16 + 6
= \$22
Then, gross profit will be -
Gross profit = 62 - 22
= \$40
Gross profit margin = [(40/62) * 100]
= 64.5%
For product 2:
Sales = \$54
Total cost is the total of direct material coat plus direct labor cost
=27 + 3
= \$30
Then, gross profit will be -
Gross profit = 54 - 30
= \$24
Gross profit margin = [(24/54) * 100]
= 44.4%
In the year 1990, the budgeted selling price, material and labor cost does not change from the year 1988, so the gross profit margin is same for product 1 and 2 in both years.

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