Problem 1 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 is provided below: Standard Case Deluxe Case $480,000 $189,000 Sales revenue Direct materials $135,000 $45,000 $105,000 $30,000 Direct labor 24,000 Machine hours 6,000 Production runs 7 12 3,000 Units produced and sold 33,000 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: (1) Allocate manufacturing overhead from the activity cost pools to each product line (2.) Compare the total per-unit cost of manufacturing standard cases and deluxe cases (3.) On a per-unit basis, which product appears to be more profitable?
Problem 1 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 is provided below: Standard Case Deluxe Case $480,000 $189,000 Sales revenue Direct materials $135,000 $45,000 $105,000 $30,000 Direct labor 24,000 Machine hours 6,000 Production runs 7 12 3,000 Units produced and sold 33,000 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: (1) Allocate manufacturing overhead from the activity cost pools to each product line (2.) Compare the total per-unit cost of manufacturing standard cases and deluxe cases (3.) On a per-unit basis, which product appears to be more profitable?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 1
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 is provided below:
Standard Case
Deluxe Case
$480,000
$189,000
Sales revenue
Direct materials
$135,000
$45,000
$105,000
$30,000
Direct labor
24,000
Machine hours
6,000
Production runs
7
12
3,000
Units produced and sold
33,000
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:
(1) Allocate manufacturing overhead from the activity cost pools to each product line
(2.) Compare the total per-unit cost of manufacturing standard cases and deluxe cases
(3.) On a per-unit basis, which product appears to be more profitable?
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