Question

Please show work. Thank you

Demo Problem 2 John produces two types of widgets. One (Lotek) is simple to manufacture and is made by hand. The other is very high tech (Hitek) and requires robotics to manufacture. The overhead for the month of May during which 300 units of Lotek and 100 units of Hitek was produced is as follows: Labor Related Overhead $5,000 Utility overhead S2,000 Machine Related Overhead $7.000 Total Overhead $14,000 The company allocates this overhead to products based on direct labor hours (volume-based measure). The expected number of direct labor hours for the month is 1400. During the month of May. Lotek used 1000 direct labor hours and Hitek used 400. Assume that the Direct Costs for Lotek and Hitek totaled $3,000 and $4000 respectively. Compute: 1. The total and per unit cost of Lotek using traditional costing. 2. The total and per unit cost of Hitek using traditional costing. Now assume that John decides to use ABC and wants to use the following costs drivers. Cost Pools Cost Driver Expected capacity | 1400 Actual usage Lotek Hitek 1000 400 Labor Related Labor hours Overhead Utility Overhead Kilowatt hours Machine Related Machine hours Overhead 2000 3500 800 500 1200 3000

Answer 1

Answer 1

	Lotek
Total costs	$ 13,000
Per Unit Costs	$    43.33

Answer 2

	Hitek
Total costs	$ 8,000
Per Unit Costs	$ 80.00

Calculations:

	Lotek	Hitek
Overheads (14000/1400*hours)	$ 10,000	$ 4,000
Direct costs	$    3,000	$ 4,000
Total costs	$ 13,000	$ 8,000
Units	300	100
Per Unit Costs	$    43.33	$ 80.00

Answers of Page 2

Answer 1

	Lotek
Total costs	$        8,371
Per Unit Costs	$        27.90

Answer 2

	Hitek
Total costs	$      12,629
Per Unit Costs	$      126.29

Calculations:

	Costs	Total activity	Activity Rate	Actual Usage - Lotek	Actual Usage - Hitek	Overheads - Lotek	Overheads - Hitek
Labor related overheads	$     5,000.00	1,400	$            3.57	1,000	400	$               3,571.43	$              1,428.57
Utility overheads	$     2,000.00	2,000	$            1.00	800	1,200	$                  800.00	$              1,200.00
Machine related overheads	$     7,000.00	3,500	$            2.00	500	3,000	$               1,000.00	$              6,000.00
Total	$ 14,000.00					$               5,371.43	$              8,628.57

	Lotek	Hitek
Overheads	$ 5,371.43	$ 8,628.57
Direct costs	$        3,000	$        4,000
Total costs	$        8,371	$      12,629
Units	300	100
Per Unit Costs	$        27.90	$      126.29

In case of any doubt, please comment.