. Lek Inc. produces two types of golf clubs, speed and power clubs. Product and production information about the two items is shown below: 8 pts

Particulars

Speed Clubs

Power Clubs

Number of sets sold

60,000

100,000

Number of set ups

100

25

Total Direct labour hours

60,000 hours

120,000 hours

Total machine hours

12,000 hours

40,000 hours

Indirect costs consist of the following:

Depreciation of factory equipment

$800,000

Setup costs

600,000

Miscellaneous indirect costs

400,000

Total

$ 1,800,000

Required:

a.If Lek Inc. uses (ABC) activity based costing, what is the total amount of indirect costs per set of clubs for each of the two types of golf clubs? Assume that depreciation is allocated based on machine hours, setup costs based on the number of setups, and miscellaneous costs are based on the number of direct labour hours. (3 Pt). (I have given you some hints in the answer)

Answer:

Item

Amount

Basis

Rate

Depreciation

800,000

( 12,000+ 40,000) MH = 52,000MH

$/MH

Set up

600,000

$/

Miscellaneous

400,000

(+) DLH = DLH

$/

b. If Lek Inc. uses the two stage costing, what is the total amount of indirect costs per set of each type of golf clubs? Assume the indirect costs are based on number direct labour hours. (5 pts)

Deluxe Club

Power Club

Rate (from a)

Used

Total

Used

Total

Depreciation

Set up

25

Misc.

60,000

Total

Per unit

13. Lek Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Lek estimated total overhead of $290,000; materials of $410,000 and direct labor of $150,000. During the year 555 incurred $418,000 in materials costs, $360,000 in overhead costs and $200,000 in direct labor costs. (Total 12 Pts)

A.What is the Applied Overhead?(4 pts)_____

Show Calculation

OH rate =

Applied =

B. Compute the amount of under- or overapplied overhead for the year. (4 Pts)

Amount $____Overapplied or

Amount $___Underapplied

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C. What is the Accounting Entry that needs to be made? (4Pts)

Debit Account? ____$ ___

Credit Account ? _____ $ ___