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automated a portion of its plant and at the same time introduced a second product called LEC 9 0 that has become increasingly popular. The
automated a portion of its plant and at the same time introduced a second product called LEC that has become increasingly popular. The LEC is a more complex product, requiring hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC requires only hours of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct laborhours.
Despite the growing popularity of the companys new LEC profits have been declining steadily. Management is beginning to believe that there may be a problem with the companys costing system. Direct material and direct labor costs per unit are as follows:
LEC LEC
Direct materials $ $
Direct labor hours and hours @ $ per hour $ $
Management estimates that the company will incur $ in manufacturing overhead costs during the current year and units of the LEC and units of the LEC will be produced and sold.
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