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Overhead allocation: traditional vs. ABC LMB Corporation makes two models of roller blades, the Junior and the Expert. Basic production information follows: Junior Expert
Overhead allocation: traditional vs. ABC LMB Corporation makes two models of roller blades, the Junior and the Expert. Basic production information follows: Junior Expert Direct Material cost per unit $ 92 $ 115 Direct Labor cost per unit $ 51 $ 75 Selling price per unit $ 450 $ 650 Expected production per month 3,000 units 6,000 units LMB has total monthly overhead costs of $716,510. Traditionally, this overhead has been allocated using machine hours (total estimated machine hours of 1,000). However, the company has now divided these costs into three cost pools and has also identified the cost drivers associated with each pool: Cost pool Machining Costs Quality Control Engineering Cost Driver Number of machine hours Number of quality inspections Number of engineering hours Total Costs 100,000 288,750 327,760 $ 716,510 Below is the estimated data related to the cost drivers identified by the company. Number of machine hours Number of quality inspections Junior Expert Total 200 1,500 800 1,000 250 1,750 754 210 964 Number of engineering hours Question 4 (18 points) Using a traditional overhead allocation method and machine hours as the cost driver, calculate the overhead allocation rate to be used by LMB (Blank 1). Round this
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