L Company manufactures two products, Blue and Red. L Company decides to use Activity-Based Costing. It...

 

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L Company manufactures two products, Blue and Red. L Company decides to use Activity-Based Costing. It has FOUR activities. FIRST activity is ADMINISTRATION with an expected total cost of $237,150. Its cost driver is PRODUCTION VOLUME. The PRODUCTION VOLUME for Blue is 13,400 units and for Red is 17,600 units. SECOND activity is BUILDING LEASE with an expected total cost of $2,045,000. Its cost driver is MACHINE FLOOR SPACE. The MACHINE FLOOR SPACE for Blue is 30,000 square feet and for Red is 70,000 square feet. THIRD activity is EQUIPMENT DEPRECIATION AND MAINTENANCE with an expected total cost of $506,540. Its cost driver is MACHINE HOURS. The MACHINE HOURS for Blue is 201,000 hours and for Red is 616,000 hours. FOURTH activity is ENGINEERING COSTS with an expected total cost of $93,600. Its cost driver is ENGINEERING HOURS. The ENGINEERING HOURS for Blue is 40 hours and for Red is 200 hours. REQUIRED: Using Activity-Based Costing, first calculate the four overhead application rates (a) per unit, (b) per square foot, ( c) per machine hour, and (d) per engineering hour. Then use these rates to calculate the (e) total overhead assigned to Product Blue and the (f) total overhead assigned to Product Red. (I cannot give partial credit unless you show your work.-SG) Finally, calculate the (g) overhead per unit for Product Blue and the (h) overhead per unit for Product Red. L Company manufactures two products, Blue and Red. L Company decides to use Activity-Based Costing. It has FOUR activities. FIRST activity is ADMINISTRATION with an expected total cost of $237,150. Its cost driver is PRODUCTION VOLUME. The PRODUCTION VOLUME for Blue is 13,400 units and for Red is 17,600 units. SECOND activity is BUILDING LEASE with an expected total cost of $2,045,000. Its cost driver is MACHINE FLOOR SPACE. The MACHINE FLOOR SPACE for Blue is 30,000 square feet and for Red is 70,000 square feet. THIRD activity is EQUIPMENT DEPRECIATION AND MAINTENANCE with an expected total cost of $506,540. Its cost driver is MACHINE HOURS. The MACHINE HOURS for Blue is 201,000 hours and for Red is 616,000 hours. FOURTH activity is ENGINEERING COSTS with an expected total cost of $93,600. Its cost driver is ENGINEERING HOURS. The ENGINEERING HOURS for Blue is 40 hours and for Red is 200 hours. REQUIRED: Using Activity-Based Costing, first calculate the four overhead application rates (a) per unit, (b) per square foot, ( c) per machine hour, and (d) per engineering hour. Then use these rates to calculate the (e) total overhead assigned to Product Blue and the (f) total overhead assigned to Product Red. (I cannot give partial credit unless you show your work.-SG) Finally, calculate the (g) overhead per unit for Product Blue and the (h) overhead per unit for Product Red.

Answer rating: 100% (QA)

Solution a Administration b Building lease C Equipment depreciation and maintenance d Engineering co... View the full answer