Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Leon Inc. produces and sells three different models of stylish men's coats-Low, Moderate, and High. The company currently uses a traditional absorption costing system
Leon Inc. produces and sells three different models of stylish men's coats-Low, Moderate, and High. The company currently uses a traditional absorption costing system to allocate manufacturing overhead costs to product lines. This traditional costing system allocates manufacturing overhead cost on the basis of each product's direct labor costs in dollars. But the company's CEO, Leon, recently attended a conference on Activity Based Costing (ABC), and he's considering ABC implementation. Leon collected the following product data for the year just ended: Low Moderate High Units produced and 25,000 10,000 5,000 sold Direct labor hours 5,000 3,500 2,000 used in production Direct labor cost used $90,000 $63,000 $36,000 in production Machine Hours used 7,500 6,000 8,500 Number of kilowatt 7,500 4,000 3,500 hours used by factory during production Number of 4 5 7 production setups Number of Employees 7 3 6 The company's CFO computed actual manufacturing overhead costs for the year just ended as: Activity Activity Costs Machining $140,000 Utilities $270,000 Setups $180,000 Supervision $480,000 Total Manufacturing Overhead Cost $1,070,000 The direct materials cost for the year just ended for units of Low was $12 per unit, for units of Moderate was $14 per unit, and for units of High was $21 per unit.
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