Question
. Lek Inc. produces two types of golf clubs, speed and power clubs. Product and production information about the two items is shown below: 8
. 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 $___Underapplied
Show Calculation
C. What is the Accounting Entry that needs to be made? (4Pts)
Debit Account? ____$ ___
Credit Account ? _____ $ ___
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Accounting General Journal
Authors: Claudia Gilbertson
11th Edition
1337623121, 9781337623124
