[The following information applies to the questions displayed below.] For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. Despite the growing popularity of the company's new LEC 90, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor
[The following information applies to the questions displayed below.] For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. Despite the growing popularity of the company's new LEC 90, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
[The following information applies to the questions displayed below.]
For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company
automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become
increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to
manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct
labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to
products on the basis of direct labor-hours.
Despite the growing popularity of the company's new LEC 90, profits have been declining steadily. Management is
beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor
costs per unit are as follows:
Direct materials
Direct labor (0.20 hours and 0.60 hours @ $10.00 per hour)
Management estimates that the company will incur $864,000 in manufacturing overhead costs during the current year
and 80,000 units of the LEC 40 and 40,000 units of the LEC 90 will be produced and sold.
Complete this question by entering your answers in the tabs below.
Required:
1-a. Compute the predetermined overhead rate assuming that the company continues to apply manufacturing overhead cost on the
basis of direct labor-hours.
1-b. Using this rate and other data from the problem, determine the unit product cost of each product.
Req 1A
Req 1B
Unit product cost
LEC 40
$ 30.00
$ 2.00
LEC 90
$ 46.00
$6.00
Using this rate and other data from the problem, determine the unit product cost of each product. (Do not round intermediate
calculations. Round your final answers to 2 decimal places.)
LEC 40
LEC 90](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9fed37ba-9d90-4d32-b4fc-c3913ad8d084%2Fa0dadf40-484b-4582-8267-56c311c67c48%2Fviyu86k_processed.png&w=3840&q=75)
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Required information
[The following information applies to the questions displayed below.]
For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company
automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become
increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to
manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct
labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to
products on the basis of direct labor-hours.
Despite the growing popularity of the company's new LEC 90, profits have been declining steadily. Management is
beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor
costs per unit are as follows:
Direct materials
Direct labor (0.20 hours and 0.60 hours @ $10.00 per hour)
Management estimates that the company will incur $864,000 in manufacturing overhead costs during the current year
and 80,000 units of the LEC 40 and 40,000 units of the LEC 90 will be produced and sold.
Complete this question by entering your answers in the tabs below.
Required:
1-a. Compute the predetermined overhead rate assuming that the company continues to apply manufacturing overhead cost on the
basis of direct labor-hours.
1-b. Using this rate and other data from the problem, determine the unit product cost of each product.
Req 1A
Req 1B
Unit product cost
LEC 40
$ 30.00
$ 2.00
LEC 90
$ 46.00
$6.00
Using this rate and other data from the problem, determine the unit product cost of each product. (Do not round intermediate
calculations. Round your final answers to 2 decimal places.)
LEC 40
LEC 90
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