Question

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 26 26 Units produced Material moves per product line Direct-labor hours per unit 21 160 160 The total budgeted material handling cost is $94,640. Required: 1. 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? 2. 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? 3. 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. 4. 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.) 1. Material handling cost per lens 2. Material handling cost per mirror 3. Material handling cost per lens 4. Material handling cost per mirror

Answer 1

Overhead Rate = Overhead Cost/Total Direct Labor Hours
=94640/(26*160+26*160)
11.3750	per DLH
1.Allocated to one lens = 11.375*160 = $1,820
2.Allocated to one Mirror = 11.375*160 = $1,820
Rate per move = 94640/(21+11) = $2,957.5 per move
3.Per lens = 2957.5*21/26 = $2388.75
4.Per mirror = 2957.5*11/26 = $1251.25