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Answer A &B&C USING CHARTS Lock-Tite Company Jobs Report Traditional OH allocation (Direct Labor Dollars) Year Ending December 31 JV28 BY92 ZF14 Sales Revenue 132,800

Answer A &B&C USING CHARTS

Lock-Tite Company

Jobs Report Traditional OH allocation (Direct Labor Dollars)

Year Ending December 31

JV28

BY92

ZF14

Sales Revenue

132,800

99,600

92,960

Calculated in 7e)

Job Costs:

Direct Material

26,560

19,920

13,280

From 7a)

Direct Labor

7,842

5,882

5,882

From 7b)

Overhead

4,313

3,235

3,235

From 7c)

Total Job Costs

38,715

29,037

22,397

Gross Margin

70.85

70.85

75.91

Gross Margin %

53%

71%

82%

Lock-Tite Company

Job Report ABC

JV28

BY92

ZF14

Sales Revenue

132,800

99,600

92,960

Job Costs:

Direct Material

26,560

19,920

13,280

Direct Labor

7,842

5,882

5,882

Overhead from 8

36,330

29,420

37,761

Total Job Costs

70,732

55,222

56,923

Gross Margin

0.47

0.45

0.39

Gross Margin %

47%

45%

39%

  1. Comparing the Gross Margin percentages of the jobs under the Activity Based Costing system, which job is more attractive for Lock-Tite to sell? Could the company be overcharging their customers for this job? Explain using complete sentences and 30 to 50 words.
  1. b. Do you think the companys policy of using a factor times direct material costs to set selling prices is a good policy? What would change if they used total costs to establish selling prices? What other information might be helpful to make this decision. Make sure you explain your answer using full sentences and 30 to 50 words.

  1. c.Should Lock-Tite Company switch to ABC method? Explain how it may or may not help manage their company. Use complete sentences and 30 to 50 words.

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