Question

1. Liberal Minority Inc. (LMI) is plastic injection molding company specializing in front-end grilles. For 2019, it estimated overhead costs of $12,560,000 to be allocated using an activity-based costing system (see the table below). LMI also estimated that direct labour will be paid at the rate of $15 per hour. Activity Cost Pool Total Quantity of Allocation Base Estimated cost Driver Cost (allocation base) $ 1,450,000 Direct materials 2,000,000 Direct labour Indirect materials Indirect labour and supervision Utilities $6,590,910 100,000 hours Inspection 3,598,000 Power consumption 4,200,000 Inspection 1,312,000 Machine usage $12,560,000 20,000 kilowatt-hours (kWh) 15,000 inspections 160,000 machine-hours Depreciation During January 20X5, Gilbert worked on two jobs, which consumed the following resources: Job 2015-A1 Job 2015-A2 Direct materials cost $ 6,500 $ 22,000 Direct labour cost $42,000 $165,000 Machine-hours 1,800 7,000 Number of inspections 200 200 Power consumed (kWh) 800 800 Number of units 100 20 At the end of the year, LMI recorded the consumption of resources as follows: direct materials, $6,660,800; direct labour, 101,540 hours; machine-hours, 158,700; power consumption, 20,370 kilowatt-hours; number of inspections, 14,780. The company also recorded actual overhead amounting to $12,538,250.

Answer 1

Liberal Minority Inc.
Req.a - Calculation of Predetermined allocation Rate
	Total Cost /	Allocation base=	Predetermined allocation rate
Indirect materials	1450000	6590910	0.21999997	Per DM$
Indirect labour	2000000	100000	20	per DLH
Utilities	3598000	20000	179.9	Per kwh
Inspection	4200000	15000	280	per inspection
Depreciation	1312000	160000	8.2	per mH
	12560000
Allocation of costs
Job 2015 - A1	Base usage	Activity Rate	Activity cost
Indirect materials	6500	0.21999997	1429.999803
Indirect labour	2800	20	56000	( 42000 / 15 = 2800 DLH )
Utilities	800	179.9	143920
Inspection	200	280	56000
Depreciation	1800	8.2	14760
Total			272109.9998
Units			20
Activity cost per unit			13605.49999
Allocation of costs
Job 2015 - A2	Base usage	Activity Rate	Activity cost
Indirect materials	22000	0.21999997	4839.999332
Indirect labour	11000	20	220000	( 165000 / 15 = 11000 DLH )
Utilities	800	179.9	143920
Inspection	200	280	56000
Depreciation	7000	8.2	57400
Total			482159.9993
Units			100
Activity cost per unit			4821.599993
Req.b	Job 2015 - A1	Job 2015 - A2
DM	6500	22000
DL	42000	165000
Mfg. OH	272110	482160
Unit cost	320610	669160
Req.c	Mfg. OH
Job 2015 - A1	272110
Job 2015 - A2	482160
Total Mfg. OH applied	754270
Req.d
Applied Mfg. OH	12560000
Actual Mfg. OH	12538250
Overapplied OH	21750
How to dispose?
Mfg. OH	21750
COGS		21750