Question

Tioga Company manufactures sophisticated lenses and mirrors used in large optical telescopes. The company is now preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the following information, Units produced Material moves per product line Direet-labor hours per unit 17 210 The total budgeted material handling cost is $94,080. Required: 1. Under a costing system that allocates overhead on the basis of direct-labor hours, the material handling costs allocated to one lens would be what amount? 2. Under a costing system that allocates overhead on the basis of direct labor hours, the material handling costs allocated to one mirror would be what amount? 3. Under activity based costing (ABC), the material handling costs allocated to one lens would be what amount? The cost driver for the material handling activity is the number of material moves. 4. Under activity based costing (ABC), the material handling costs allocated to one mirror would be what amount? The cost driver for the material handling activity is the number of material moves (For all requirements, Do not round your intermediate calculations.) 1. Material handing cost per lens 2. Material handing cost per mirror 3. Material handling cost per les 4. Material handling cost per mirror

Answer 1

Material handling cost per lens = $ 2 Material handling cost per mirror = $ Material handling cost per lens = $ 4 Material handling cost per mirror = $ 2,380 980 working notes units produced Products lenses mirrors direct labor hours per unit Total labor hours 210 $ 5,880 5,880 11,760 2100 $ Total budgeted material handling cost = $ 94,080 Required 1 Material handling cost per lens = 94080 /11760 Required 2 Material handling cost per mirror = 94080 /11760 = $

Required 3 Activity Based Costing Material handling cost per lens Total budgeted material handling cost = $ 94,080 material moves per lens = material moves per mirror = total material moves = Total number of lenses produced = Material handling cost per lens = ( 94,080/24) x 17 28 3,920 x 17 28 140 x 17 2,380 $ Required 4 Material handling cost per lens = ( 94,080/24) X7 3,920 x 7 140 x 7 980