Question

The following overhead cost information is available for the Bright LCD Corporation, a manufacturer of computer monitors:


During the year, 1,000 purchase orders were issued; 300 shipments of material were received; 600 machine setups occurred; and 750 inspections were conducted. Employees worked a total of 10,000 direct labor hours on assembly of the monitors. The corporate managers are trying to decide whether they should use a traditional overhead allocation method based on direct labor (assembly) hours, or switch to an activity-based costing system. Assume that a batch of 200 monitors has resulted in the following cost activity:
Purchase orders ........... 7
Shipments of material received .....12
Machine setups ........... 2
Direct labor assembly hours ......50
Inspections .............. 3
A. Determine the overhead allocation for the batch of 200 monitors under the traditional overhead allocation based on direct labor hours.
B. Determine the overhead allocation for the batch under activity-basedcosting.


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  • CreatedMarch 11, 2015
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