Question
6. Bossier Company makes precision mirrors and lenses for large optical telescopes. The firm typically allocates overhead using a single cost driver, direct labor hours,
6. Bossier Company makes precision mirrors and lenses for large optical telescopes. The firm typically allocates overhead using a single cost driver, direct labor hours, but is considering a change to activity-based costing. If it makes this change, it would use the number of material moves for each product line as the driver for material handling costs. Consider the following data: Item Mirrors Lenses Units Produced 30 30 Material moves/product line 4 16 Direct labor/ unit 250 hours 250 hours Budgeted materials handling costs: $90,000 i. Allocating materials handling overhead costs using a single direct labor hour driver, how much budgeted overhead would be allocated to one mirror? __________ ii. And to one lens? __________ iii. Allocating materials handling overhead costs using activity-based costing, how much budgeted overhead would be allocated to one mirror? __________ iv. And to one lens? __________
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