Exercise 5-26

Tioga Company manufactures sophisticated lenses and mirrors used in large optical telescopes. The company is now preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the following information.

Lenses Mirrors

Units produced 25 25

Material moves per product line 5 15

Direct labor hours per unit 200 200

The total budgeted material-handling cost is $50,000.

Required:

1. Under a costing system that allocates overhead on the basis of direct-labor hours, the materialhandling costs allocated to one lens would be what amount?

2. Answer the same question as in requirement (1), but for mirrors.

3. Under activity-based costing (ABC), the material-handling costs allocated to one lens would be what amount? The cost driver for the material-handling activity is the number of material moves.

4. Answer the same question as in requirement (3), but for mirrors.