Question

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

United 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:

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.

DO NOT ROUND INTERMEDIATE CALCULATIONS

Material handling cost per lens:

Material handling cost per mirror:

Material handling cost per lens:

Material handling cost per mirror:

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Homework Answers

Answer #1

Direct labor hours lenses

 5760 24*240
Direct labor hours mirrors 5760 24*240
Total Direct labor hours 11520
1 Total Material Handling costs for Lens 30820 61640/11520*5760
Divide by Units 24
Material Handling costs per Lens 1284
2 Total Material Handling costs for Mirrors 30820 61640/11520*5760
Divide by Units 24
Material Handling costs per mirror 1284
3 Total Material Handling costs for Lens 39885 61640/(22+12)*22
Divide by Units 24
Material Handling costs per Lens 1662
4 Total Material Handling costs for Mirrors 21755 61640/(22+12)*12
Divide by Units 24
Material Handling costs per mirror 906.5
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