**LoneStar Productions Overview:**LoneStar Productions is a Texas-based manufacturing company that produces three specialty products for farming equipment: Dallas, Houston, and Austin.**Product Cost Breakdown:**The following information is available for each product:| | Dallas | Houston | Austin ||-----------------|--------|---------|--------|| Direct material cost per unit | $2.00 | $8.00 | $10.00 || Direct labor cost per hour | $15.00 | $16.75 | $18.00 |LoneStar Productions currently applies overhead using a predetermined rate based on direct labor hours. The estimated direct labor hours for the year are 132,026.**Activity-Based Costing Proposal:**The product leader for Houston has suggested that LoneStar Productions switch to activity-based costing (ABC). The following activities, cost drivers, estimated costs, and estimated cost driver units for the year have been identified:| Activity | Recommended Cost Driver | Estimated Cost | Estimated Cost Driver Units ||---------------------|-------------------------|----------------|-----------------------------|| Materials Handling | Requisition Request | $33,912 | 1256 Requests || Machine Operations | Machine Hours | $1,425,000 | 12,500 Hours || Safety Compliance | Compliance Test | $125,400 | 110 Tests |**Total Overhead Cost:** $1,584,312**Cost Driver Rate Calculation:**- **Safety Compliance:** To find the cost driver rate for Safety Compliance, divide the estimated cost by the estimated cost driver units. \[ \text{Cost Driver Rate for Safety Compliance} = \frac{\$125,400}{110} = \$1,140 \]**Question:**What is the cost driver rate for Safety Compliance?- $0- $1,000- **$1,140** (Correct Answer)- $114

Cost driver rate for Safety Compliance = Estimated safety compliance cost/Total tests

LoneStar Productions is a Texas based manufacturing company that produces three specialty products for farming equipment. The three products are Dallas, Houston, and Austin. The following information is available for each product. Dallas Houston Austin Direct material cost $2.00 $8.00 $10.00 per unit Direct labor cost $15.00 $16.75 $18.00 per hour LoneStar Productions presently applies overhead using a predetermined rate based on direct labor hours. Estimated Direct Labor hours for the year are 132,026. The product leader for Houston has suggested that LoneStar Productions switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for the year: Estimated Recommended Estimated Cost Activity Cost Driver Cost Driver Units Materials Requisition 1256 $33,912 Handling Request Request Machine 12500 Machine Hours $1,425,000 Operations Hours Safety Compliance $125,400 110 Test Compliance Test Total OH Cost $1,584,312 What is the cost driver rate for Safety Compliance? O $0 O $1,000 O $1,140 O $114

LoneStar Productions is a Texas based manufacturing company that produces three specialty products for farming equipment. The three products are Dallas, Houston, and Austin. The following information is available for each product. Dallas Houston Austin Direct material cost $2.00 $8.00 $10.00 per unit Direct labor cost $15.00 $16.75 $18.00 per hour LoneStar Productions presently applies overhead using a predetermined rate based on direct labor hours. Estimated Direct Labor hours for the year are 132,026. The product leader for Houston has suggested that LoneStar Productions switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for the year: Estimated Recommended Estimated Cost Activity Cost Driver Cost Driver Units Materials Requisition 1256 $33,912 Handling Request Request Machine 12500 Machine Hours $1,425,000 Operations Hours Safety Compliance $125,400 110 Test Compliance Test Total OH Cost $1,584,312 What is the cost driver rate for Safety Compliance? O $0 O $1,000 O $1,140 O $114

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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