Holly Manufacturing Case Study Analysis Help With Solution
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:
|Sales and production volume in units|
|Unit Selling Price||$600.00||$900.00|
|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|
|Total manufacturing overhead costs||$135,000|
Selling and Administrative expenses:
Commission to sales person 3 % of Sales Revenue
Advertising, CEO salary, etc. $ 30,000 per year.
* These manufacturing overhead costs are company-wide, 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.
How it Works
How It works ?
Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention product code mentioned in end of every Q&A Page. You can also send us your details through our email id email@example.com with product code in the email body. Product code is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.
Step 2:- While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to product code . The date is asked to provide deadline.
Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id firstname.lastname@example.org and email@example.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.
Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.
Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.
Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.
Features for Assignment Help
We believe in providing no plagiarism work to the students. All are our works are unique and we provide Free Plagiarism report too on requests.
We believe in providing perfect, relevant and 100% accurate solutions to the student as per questions asked. All our experts are perfect in providing that so as to give unique experience to the students.
We are the only service providers boasting of providing original, relevant and accurate solutions. Our three stage quality process help students to get perfect solutions.
All our works are kept as confidential as we respect the integrity and privacy of our clients.
- Physics Assignment Help
- Chemistry Assignment Help
- Engineering Assignment Help
- Psychology Assignment Help
- Online exam Help
- Marketing Assignment Help
- Arts Assignment Help
- Sociology Assignment Help
- Project Management Assignment
- Case Study Help
- Nursing Assignment Help
- Research Assignment Help
- Operations Management Assignment help
- Accounting Assignment Help
- Biology Assignment Help
- Mathematics Assignment Help
- English Assignment Help
- Business Plan Help
- Essay Writing Help
- Human Resource Assignment Help
- Accounting Homework Help
- Computer Science Assignment Help
- Finance Assignment Help
- Economics Assignment Help
- Statistics Homework Help
- Management Assignment Help
- Strategy Management Assignment Help
- Auditing Assignment Help
- Information Management Assignment Help
- Online Assignment Writing help
- Best Assignment Help
- Humanities Assignment help
President Brahms has hired your consulting team to help him understand cost allocation and provide more accurate information and advice. Here are some questions to guide your work.
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 mode
– 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?
– How would the use of more than one cost pool improve Holly’s cost allocation?
Holly’s controller developed the following data for use in activity-based costing:
|Overhead Cost||Amount||Cost Driver||Cello||Cello|
|Building depreciation||$40,000||Square footage||3,000||1,000|
|Maintenance||$15,000||Direct labor hours||9,000||1,000|
|Purchasing||$20,000||# of purchase orders||1,500||500|
|Inspection||$12,000||# of inspections||400||600|
|Indirect materials||$15,000||# of units manufactured||900||100|
|Supervision||$30,000||# of inspections||400||600|
|Supplies||$3,000||# of units manufactured||900||100|
– Use activity-based costing to allocate the costs of overhead per unit and in total to each model of cello. Show all supporting calculations. It is appropriate to use an excel document to do your computations in Excel.
– Calculate the cost of a custom cello using activity-based costing.
– Why is the cost different from the cost calculated using the traditional allocation method?
– At the current selling price, is the company covering its true cost of production? Briefly explain
– What price could Holly Manufacturing set that would give about the same profit margin (% ) as the standard cello? Show all calculations.
– What should Holly Manufacturing do if the quantity of custom cellos sold at the new price falls to 50 per year?
– What should Holly Manufacturing do about the situation if market conditions are such that the price of the custom cello cannot exceed $900?
– At a selling price of $600 for the standard cello and $1,000 for the custom cello, and assuming the same product mix, what is the breakeven unit volume for each cello (remember it is difficult to sell a fraction of a cello, so round-up. You need to consider the product mix when selling 2 products).
Please show President Brahms a contribution Income Statement reflecting the sales at breakeven.
Write a brief report to President Brahms explaining your conclusions and the benefits of your suggestions. What are the lessons learned from this case that can help him understand cost allocation.
Product Code :Case86
To get answer for this question, kindly click here (Note: Don’t forget to write the product code in comment section)
You can also email us at firstname.lastname@example.org but please mentioned product code in the mail body while sending emails.You can browse more questions to get answer in our Q&A sections here.