Question
Sandstorm Manufacturing Inc. makes two types of industrial component parts-the LE100 and the UL600. It annually produces 51,000 units of LE100 and 11,600 units
Sandstorm Manufacturing Inc. makes two types of industrial component parts-the LE100 and the UL600. It annually produces 51,000 units of LE100 and 11,600 units of UL600.The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: LE100 UL600 Total Direct materials $357,325 $153,550 $510,875 Direct labor $ 111,000 $ 38,000 $149,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Activity Cost Pool (and Activity Measure) Manufacturing- Overhead LE100 UL600 Total 81,000 Machining (machine-hours) $ 152,900 58,000 139,000 Setups (setup hours) 74,400 30 210 240 Product-level (number of 76,660 1 1 2 products) General factory (direct labor 111,000 38,740 $ $38,000 $149,000 dollars) Total manufacturing overhead cost $ 342,700
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