5. B Estimated % of Driver Calculated Total Allocated costs units Driver Activity Rate Design 14% $16,601 22 # of Jobs $754.59 Batch setup 10% $11,858 50 # of set ups $237.16 Material 62% $73,520 240 # of $306.33 Handling materials Inspection 5% $5,929 1,200 # of units $4.94 General Factory 9% $10,672 14,000 machine hours $0.76 Total Budgeted OH 100% $118.580 Start here with 4a amount c) During May, the company tracked the necessary drivers for each cost pool. These driver units are listed in the table below. Multiply these units by the appropriate "activity rate" from the table above in 5b. Add the total together. This represents applied overhead for Lock-Tite had used ABC costing. Round to the nearest whole dollar. Actual Driver units Driver Applied Factory Overhead Design 30 # of Jobs 2263.77 Batch setup 70 # of set ups 1660.12 Material Handling 330 # of materials 101088.90 Inspection 1,600 # of units 87904 General Factory 13,800 machine hours 10488 Total Annlied Overhead 203.404 79 d) Using ABC, would overhead be over- or under-applied? By how much?e) Overhead is becoming a bigger and bigger cost component of Lock-m products. The vice president has indicated the company has had a difficult time applying overhead because of the complexity of their products. Products tend to have a higher number of components that require more costly material handling and designing. Which method do you think would be best for Lock-lite to use to apply overhead? Traditional plant-wide overhead rate using direct labor dollars, hours, machine hours, or ABC method? Support your answer by incorporating observations from the calculations in 5) and 6). Answer with complete sentences using between 30 and 50 words. ABC method would be better to use. Because muses a more specic rate which is easier to analyze. Therefore, ABC method would be better to use. 6. To better understand the impact of the applying overhead for their job costing facility, Lock-m wants to analyze a few of its larger jobs using both their traditional (percent of direct labor dollars) versus the ABC method. Lock-Mthree largest jobs during the year were, N28, BY92 and ZFl4. Use the calculations in a) through g) below to complete the Jobs Report here. Use whole dollar amounts except for Gross Margin % Sales Revenue From 62) Job Costs: Direct Material Start here in 6a) Direct Labor From 6b) Overhead From 66) Total Job CoststOGS DM+DL+0H Gross Margin Sales - COGS Gross Margin % I:I:I:|] GM/Sales 0 Direct Material: Job JV 28 used 8% of the company's Direct Material (amount from JE 1b), Job BY92 used 6% and Job ZF 14 used 4% the company's Direct Material. Use these percentages and calculate the Direct Material for each job. The combined total for the three jobs WILL NOT agree to the total costs because Lock-m has other jobs they sold as well as jobs that are still in inventory. Include these amounts in the Jobs Report above. 144000 144000 144000 ---EE_ g) Direct Labor: 8% of the company's actual Direct Labor costs were spent on Job JVZS. Job BY92 and ZF14 each used 3% and 2%, respectively. Use these percentages and calculate the Direct Material for each job. Include these amounts in the table above. JobJVZS mm mm Total DL 154000 % used by job 4% 3% 2% Given above DL per job 6160 4620 3080 Calculate (multiply) h) Factory Overhead; Use the 55% of direct labor dollars and calculate the overhead as it would be applied using a plantwide predetermined rate. Include the amounts in the Jobs Report above for Overhead Cost. Job JV28 Job BY92 Job ZF14 DL per job 6160 4620 3080 Calculated in 6b bottom Predetermined rate 0.55 0.55 0.55 given in connect FOH per job 3388 2541 1694 Calculate (multiply) i) Determine the total job costs by adding DM, DL and OH for each job in the Jobs Report above. (Add DM, DL and OH together). Sales Revenue: Using Lock-Tite's average markup rate (showing 2 decimal places) (calculated in 3d) in the table below (yellow cells). Use this markup rate to estimate the sales revenue for each of the 3 jobs. Job JV28 Job BY92 Job ZF14 Total Job Costs 21068 15801 10534 Calculated in 6d Cost-Plus Markup Rate 3.37 3.37 3.37 Calculated in 3d Sales Revenue per Job 70999.16 53249.37 35499.58 Calculate (multiply) k) Calculate gross margin for each job in the Jobs Report below. Note: Gross Margin equals Sales Revenue minus total job costs. 1) Calculate Gross Margin percent as gross margin divided by sales revenue in the Jobs Report below. m) Compare the Gross Margin percentages for these three jobs with the company's overall gross margin percent calculated in 3c above. Why are the percentages in this table different from the percent in 3c? Should Lock-Tite be concerned with the accuracy of the overhead applied to each job? How does this effect the Jobs Report created above? Explain why in 30 to 50 words. 77. In an Activity Based Costing System, overhead is allocated to each job from each cost pool and totaled. Driver units' statistics are accumulated for each job and they are listed in the table below. Complete the table below for the following requirements. For each job, determine the total overhead applied by adding the costs allocated from each pool. (Support, Batch Setups, Product Sustaining and General Factory). Note: Use the activity rates calculated in 5b). Round costs to the nearest whole dollar. Design Batch Setups Material Handling Inspection General Factory Total 0H Applied |:| |:| |:| ABC Job Costing: Complete the Jobs Report here using the directions below. Lock-lite, Company Job ' - . rt ABC Sales Revenue _ Job Costs: Direct Material Direct Labor Overhead om 8 Total Job Costs Gross Margin Gross Margin % n) Sales Revenue, Direct Material and Direct Labor costs will be the same regardless of how overhead is applied. Include these amounts from the Jobs Report prepared in 6) above. Presumably, the customers of these jobs have already been billed and paid these revenue amounts so we cannot change them. The Direct Material and the Direct Labor information would also remain the same as it indicates the amounts requisitioned 'om raw materials and employee time- card information. 0) Include the applied overhead calculated under ABC as calculated in 7) above. Because this is a managerial evaluation, the company is ee to presume alternate methods of cost allocations. p) Complete the Jobs Report and calculate Gross Margin percent for each job. Required information [The following information applies to the questions displayed below] The following information is available for LockTite Company, which produces specialorder security products and uses a job order costing system. April 30 May 31 Inventories Raw materials $25,000 $ 43,000 Work in process 9,900 19,200 Finished goods 51,000 34,400 Activities and information for May Raw materials purchases (paid with cash) 171,000 Factory payroll (paid with cash) 200,000 Factory overhead Indirect materials 9,000 Indirect labor 46,000 Other overhead costs 114,000 Sales (received in cash) 1,600,000 Predetermined overhead rate based on direct labor cost 55% [