Laughton Corporation makes two styles of cases for compact disks, the standard case and the deluxe case. The company has assigned $210,000 in monthly manufacturing overhead to three cost pools as follows: $90,000 to machining costs, $60,000 to production set-up costs, and $60,000 to inspection costs. Additional monthly data are provided below: Standard Case Deluxe Case Sales revenue $ 480,000 $ 189,000 Direct materials $ 135,000 $ 45,000 Direct labour $ 105,000 $ 30,000 Machine hours 24,000 6,000 Production runs 7 12 Units produced and sold 33,000 3,000 The first and last unit in each production run is inspected for quality control purposes. Inspection costs are allocated to the products based on the number of inspections required. Machining costs are allocated to products using machine hours as an activity base. Set-up costs are allocated to products based on the number of production runs each product line requires. Required: (A) Allocate manufacturing overhead from the activity cost pools to each product line. Record your answers in the following table: (Round percentages to two-decimal places.) Standard Deluxe Machining cost pool allocation Set-up cost pool allocation Inspection cost pool allocation Total overhead allocation (B) Compare the total per-unit cost of manufacturing standard cases and deluxe cases. Record your answers in the following table: (Round per-unit cost to two decimal places). Standard Deluxe Total manufacturing costs Units produced and sold Costs per unit (C) On a per-unit basis, what is the profitability per unit for each of the two product lines? Record your answers in the following table. Which product line appears to be most profitable? (Round interim and final answers to two decimal places).
Laughton Corporation makes two styles of cases for compact disks, the standard case and
the deluxe case. The company has assigned $210,000 in monthly manufacturing
pools as follows: $90,000 to machining costs, $60,000 to production set-up costs, and $60,000 to
inspection costs. Additional monthly data are provided below:
Standard Case Deluxe Case
Sales revenue $ 480,000 $ 189,000
Direct materials $ 135,000 $ 45,000
Direct labour $ 105,000 $ 30,000
Machine hours 24,000 6,000
Production runs 7 12
Units produced and sold 33,000 3,000
The first and last unit in each production run is inspected for quality control purposes. Inspection costs
are allocated to the products based on the number of inspections required. Machining costs are
allocated to products using machine hours as an activity base. Set-up costs are allocated to products
based on the number of production runs each product line requires.
Required:
(A) Allocate manufacturing overhead from the activity cost pools to each product line. Record your
answers in the following table: (Round percentages to two-decimal places.)
Standard Deluxe
Machining cost pool allocation
Set-up cost pool allocation
Inspection cost pool allocation
Total overhead allocation
(B) Compare the total per-unit cost of manufacturing standard cases and deluxe cases. Record your
answers in the following table: (Round per-unit cost to two decimal places).
Standard Deluxe
Total manufacturing costs
Units produced and sold
Costs per unit
(C) On a per-unit basis, what is the profitability per unit for each of the two product lines? Record your
answers in the following table. Which product line appears to be most profitable? (Round interim and
final answers to two decimal places).
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