Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lexington Doors, Inc. was incorporated in the province of British Columbia on October 28, 2011. The company makes custom doors for luxury homes. Although the

image text in transcribedimage text in transcribed

Lexington Doors, Inc. was incorporated in the province of British Columbia on October 28, 2011. The company makes custom doors for luxury homes. Although the operations of the company focus mainly on custom-built doors, once in a while, the company carries out mass production of standard doors on order. Allison Forsythe, the company's Chief Financial Officer, is studying the following report relating to the company's budgeted manufacturing overhead costs for the year 2022: Overhead Cost Pools Purchasing Production (cutting, milling, finishing) Setting up machines Inspecting Utilities Total budgeted overhead costs Amount $180,000 $400,000 $135,000 $160,000 $300,000 $1,175,000 For the last three years, the company has been charging overhead to products on the basis of machine hours. For the year 2022, 100,000 machine hours are budgeted. Allison has recently directed Sandra Chamberlain, her Finance Manager, to implement an activity- based costing system. At Sandra's request, the company's accountant and production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools. Overhead Cost Pools Purchasing Production (cutting, milling, finishing) Setting up machines Inspecting Utilities Activity Cost Drivers Number of orders Direct labour hours Number of setups Number of inspections Square metres occupied Total Drivers 500 80,000 1,000 5,000 75,000 During this month, the company received an order for 50 doors from a housing development contractor. The accountant prepares cost estimates for producing the 50 doors so that Sandra can submit a contract price per door to the contractor. The following data for the production of 50 doors is accumulated: Direct materials Direct labour Machine hours Direct labour hours Number of purchase orders Number of machine setups Number of inspections Number of square metres occupied $120,000 $135,000 12,000 10,000 50 80 380 7,000 Required: (20 marks) 1. Calculate the predetermined overhead rate using traditional (job) costing with machine hours as the basis. 4 marks 2. Calculate the manufacturing cost per door under traditional (job) costing. 6 marks 3. Calculate the manufacturing cost per door under the proposed activity-based costing. 6 marks 4. What would you recommend to management? Provide the reasoning for your recommendation. 4 marks

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The ASQ Auditing Handbook

Authors: J. P. Russell

3rd Edition

0873896661, 978-0873896665

More Books

Students also viewed these Accounting questions

Question

Define induction and what are its objectives ?

Answered: 1 week ago

Question

Discuss the techniques of job analysis.

Answered: 1 week ago

Question

How do we do subnetting in IPv6?Explain with a suitable example.

Answered: 1 week ago

Question

Explain the guideline for job description.

Answered: 1 week ago

Question

What is job description ? State the uses of job description.

Answered: 1 week ago