Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 100 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows: Baseball Bats Tennis Rackets Sales revenue $ 1,580,000 $ 1,125,000 Direct labor 320,000 160,000 Direct materials 564,000 293,000 Required: a. Compute the profit for each product using plantwide allocation.

Instructions are below.

Explanation:

Giving the following information:

The rate used is 100 percent of direct labor costs.

Baseball Bats - Tennis Rackets:

Sales revenue= $ 1,580,000 $ 1,125,000

Direct labor= 320,000 160,000

Direct materials= 564,000 293,000

First, we need to allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Baseball= 320,000*1= 320,000

Tennis= 160,000*1= 160,000

Baseball:

Sales= 1,580,000

COGS= (320,000 + 564,000 + 320,000)= (1,204,000)

Gross profit= $376,000

Tennis:

Sales= 1,125,000

COGS= (160,000 + 293,000 + 160,000)= (613,000)

Gross profit= $512,000

The answer to the question is poor planning.

ABC grocery store’s profits have been dropping significantly due to the wrong direction that many departments of the stores are pursuing. It can be assumed that poor coordination and miscommunication causes these stores to work on targets that the owner actually does not prioritize. This is apparent from how the owner realized that she didn’t provide enough direction to the managers in regards to her expectations for how these stores should operate.