Precision Lens Company manufactures sophisticated lenses and mirrors used in lar
ID: 2489368 • Letter: P
Question
Precision Lens 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.
Units produced: Mirrors: 22 Lenses 22
Material moves per product line: 22 12
Direct-labor hours per unit: 210 210
The total budgeted material-handling cost is $63,800.
Required: 1. 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? (Do not round your intermediate calculations. Round your final answer to the nearest dollar amount.)
Material-Handling cost per mirror ____?
2. 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? (Do not round your intermediate calculations. Round your final answer to the nearest dollar amount.)
Material-Handling cost per lens ____?
3. 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. (Do not round your intermediate calculations. Round your final answer to the nearest dollar amount.)
Material-Handling cost per mirror ____?
4. 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. (Do not round your intermediate calculations. Round your final answer to the nearest dollar amount.)
Material-Handling cost per lens ____?
Explanation / Answer
Requirement-1:
Calculation of material handling cost per mirror under costing system:
Products
Units produced
(A)
Direct labour hours per unit
(B)
Total labour hours
Lenses
22
210
4620
Mirrors
22
210
4620
Total
9240
Total number of direct labour hours = 9240
Material handling cost per Mirror = $63,800 / 9240 * 210
= $1,450
Requirement-2:
Calculation of material handling cost per Lens under costing system:
Products
Units produced
(A)
Direct labour hours per unit
(B)
Total labour hours
Lenses
22
210
4620
Mirrors
22
210
4620
Total
9240
Total number of direct labour hours = 9240
Material handling cost per Mirror = $63,800 / 9240 * 210
= $1,450
Requirement-3:
Calculating Material handling costs per Mirror under costing system:
Products
Units produced
(A)
Direct labour hours per unit
(B)
Total labour hours
Lenses
12
210
2520
Mirrors
22
210
4620
Total
7140
Total number of direct labour hours = 7140
Material handling cost per Mirror = $63,800 / 7,140 * 210
= $1,876
Requirement-4:
Calculating Material handling costs per Mirror under costing system:
Products
Units produced
(A)
Direct labour hours per unit
(B)
Total labour hours
Lenses
12
210
2520
Mirrors
22
210
4620
Total
7140
Total number of direct labour hours = 7140
Material handling cost per Mirror = $63,800 / 7,140 * 210
= $1,876
Products
Units produced
(A)
Direct labour hours per unit
(B)
Total labour hours
Lenses
22
210
4620
Mirrors
22
210
4620
Total
9240
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