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ces Lillis Manufacturing makes a variety of industrial fittings. The products are similar, but not identical, and all go through the same processes. Some
ces Lillis Manufacturing makes a variety of industrial fittings. The products are similar, but not identical, and all go through the same processes. Some orders from Lillis go to companies in regions with strict environmental regulations. Lillis is required to conduct compliance tests on those orders before shipment. The company produces to order and uses a job costing system. Overhead is applied to jobs based on direct labor cost. The cost analyst at Lillis recently put together an estimate of overhead for the coming year, which is shown in the following table. Category Machining Assembly Setup labor Packaging Amount $ 496,000 296,000 416,000 Compliance testing. Total 276,000 196,000 $1,680,000 Three jobs were started and completed in November. Details on the jobs follow. Direct materials Direct labor Job 1101 $ 4,400 $11,000 Job 1102 $6,240 Job1103 $5,250 $16,640 $ 13,650 Number of units 220 520 420 240 800 360 Machine hours 520 720 620 1 Yes 2 1 No Yen Direct labor hours Production runs Compliance testing required? Lillis is considering adopting an activity-based costing system. The cost analyst has studied the system and has recommended the following cost drivers for each of the overhead categories. She has also estimated the annual volume for each of the cost drivers. This information follows. Overhead Category Machining Assembly Setup labor Packaging Compliance testing Cont Driver Machine hours Direct-labor hours Production rune Unita Orders teated Annual Cost Driver Volume 24,800 machine-hours 16,000 direct-labor hours 80 production runs 184,000 units 20 orders tested
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