Overhead is becoming a bigger and bigger cost component of Lock-Tite's products. The vice president has indicated the company has had a difficult time applying overhead because of the complexity of its products. Products tend to have a higher number of components that require more costly material handling and designing. Which method do you think would be best for Lock-Tite to use to apply overhead? Traditional plant-wide overhead rate using direct labor dollars, hours, machine hours, or ABC method? incorporating observations from the calculations in 5) and 6)

#5

Design Batch setup Material Handling Inspection General Factory Total Budgeted OH % of Total Allocated costs 14% 16,601 10% 11,858 620/ 0 73,520 5% 5.929 9% 10,6?2 1 100% 118,580.00 Estimated Driver Calculated units Driver Activity Rate 22 # of Jobs 754.60 50 # of set ups 237.16 240 # of materials 306 .33 1,200 # of units 49.41 14,000 machine hours 0.76 (-Start here with 4a amount Lock-Tite Company Jobs Report - Traditional OH allocation (DL dollars) Year Ending December 31 JV28 BY92 ZF14 Sales Revenue 18,491 13,868 9,245 From be) Job Costs: Direct Material 1,360 1,020 680 Start here in 6a) Direct Labor 1,840 1,380 920 From 6b) Overhead 1,012 759 506 From 6c) Total Job Costs/COGS 4,212 3,159 2, 106 DM+DL+OH Gross Margin 14,279 10,709 7,139 Sales - COGS Gross Margin % 77.22% 77.22% 77.22% GM/Sales