Question
Laughton Corporation makes two styles of cases for compact disks, the standard case and the deluxe case. The company has assigned $210,000 in monthly manufacturing
Laughton Corporation makes two styles of cases for compact disks, the standard case and the deluxe case. The company has assigned $210,000 in monthly manufacturing overhead to three cost pools as follows: $90,000 to machining costs, $60,000 to production set-up costs, and $60,000 to inspection costs.
Additional monthly data are provided below:
Standard Deluxe
Case Case
Sales revenue $480,000 $189,000
Direct materials $135,000 $45,000
Direct labor $105,000 $30,000
Machine hours 24,000 6,000
Production runs 7 12
Units produced and sold 33,000 3,000
The first and last unit in each production run is inspected for quality control purposes. Inspection costs are allocated to the products based on the number of inspections required. Machining costs are allocated to products using machine hours as an activity base. Set-up costs are allocated to products based on the number of production runs each product line requires.
a)Allocate manufacturing overhead from the activity cost pools to each product line.
b)Compare the total per-unit cost of manufacturing standard cases and deluxe cases.
c)On a per-unit basis, which product appears to be more profitable?
Show all calculations, and provide answer to c) in complete sentences.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started