5.Lincoln Company has a factory with the following characteristics for the week:direct labor of $8817, direct materials of $7281 fixed overhead of $13845, variable overhead of $16034, 1378 units produced, and 126 shipments made.

One of its products is LQ6. LQ6 used 41 hours of labor. The factory made 336 units of LQ6 at a materials cost of $5.13 per unit. LQ6 also requires 10 shipments. On average, labor costs are $24 per hour.

For this question, assume there is one cost pool with direct materials as the allocation base.

How much overhead cost is allocated to LQ6? (round to whole number of $)

6. Now assume that there are two cost pools.

Cost pool 1 includes fixed overhead and uses shipments as the allocation base.

Cost pool 2 includes variable overhead and uses direct labor as the allocation base.

How much total overhead is allocated to LQ6? (round to whole number of $)

7. One of the two cost allocation amounts calculated above is larger than the other. What is the best explanation for the difference in results for the two cost allocation systems?

a.

Direct materials is not a good choice for allocation base since it isn't the cost driver.

b.

Production of LQ6 is very materials intensive relative to other products made in the factory.

c.

More cost pools means each pool has less in it and thus less overhead gets allocated.

d.

Production of LQ6 is very labor intensive relative to other products made in the factory.

e.

Production of LQ6 is very shipments intensive relative to other products made in the factory.