Question
In: Accounting
Tioga Company manufactures sophisticated lenses and mirrors used in large optical telescopes. The company is now...
Tioga Company manufactures sophisticated lenses and mirrors used in large optical telescopes. The company is now preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the following information.
| Lenses | Mirrors | |||
| Units produced | 24 | 24 | ||
| Material moves per product line | 22 | 12 | ||
| Direct-labor hours per unit | 240 | 240 | ||
The total budgeted material-handling cost is $61,440.
Required:
- Under a costing system that allocates overhead on the basis of direct-labor hours, the material-handling costs allocated to one lens would be what amount?
- Under a costing system that allocates overhead on the basis of direct-labor hours, the material-handling costs allocated to one mirror would be what amount?
- Under activity-based costing (ABC), the material-handling costs allocated to one lens would be what amount? The cost driver for the material-handling activity is the number of material moves.
- Under activity-based costing (ABC), the material-handling costs allocated to one mirror would be what amount? The cost driver for the material-handling activity is the number of material moves.
(For all requirements, Do not round your intermediate calculations.)
Solutions
Expert Solution
| Plantwide overhead rate = Total Budgeted material handling cost / Direct labor hours |
Total Budgeted material handling cost = $61,440
Direct labor hours = (240 hours * 24 units) + (240 hours * 24 units) = 11,520
Planwide overhead rate = $61,440 / 11,520 direct labor hours = $5.3333 per direct labor hour
Requirement 1:
Material-handling costs allocated to one lens
Material-handling cost allocated to lens = 24 lens * 240 direct labor hours * $5.3333 per direct labor hours = $30,720
Material-handling costs allocated to one lens = $30,720 / 24 units = $1,280 per lens
Requirement 2:
Material-handling costs allocated to one mirror
Material-handling cost allocated to mirrors = 24 mirrors * 240 direct labor hours * $5.3333 per direct labor hours = $30,720
Material-handling costs allocated to one mirror = $30,720 / 24 units = $1,280 per mirror
| Activity rate = Total Material handling costs / Total number of material moves |
Total Material handling costs = $61,440
Total number of material moves = 22 + 12 = 34
Activity rate = $61,440 / 34 moves = $1,807.0588
Requirement 3:
Material-handling costs allocated to one lens under Activity based costing
Material-handling cost allocated to lens = 22 material moves * $1,807.0588 per material move = $39,755
Material-handling costs allocated to one lens = $39,755 / 24 units = $1,656 per lens
Requirement 4:
Material-handling cost allocated to mirrors = 12 material moves * $1,807.0588 per material move = $21,685
Material-handling costs allocated to one mirror = $21,685 / 24 units = $904 per mirror
All the best...
ekkarill92 answered 8 months agoRelated Solutions
Tioga Company manufactures sophisticated lenses and mirrors used in large optical telescopes. The company is now...
Tioga Company manufactures sophisticated lenses and mirrors used
in large optical telescopes. The company is now preparing its
annual profit plan. As part of its analysis of the profitability of
individual products, the controller estimates the amount of
overhead that should be allocated to the individual product lines
from the following information.
Lenses
Mirrors
Units produced
22
22
Material moves per product line
17
7
Direct-labor hours per unit
230
230
The total budgeted material-handling cost is
$71,720.
Required:
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