A.) Using the current costing system, compute the amount of overhead cost that would be charged to one Lucky Leprechaun Clock.

B.) Now assume that the company wants to use activity-based costing. Overhead will be broken down into 3 cost pools. Ordering costs amount to $300,000, and will be charged to products based on the number of purchase orders needed during the year. Factory administrative costs amount to $382,000 and will be charged to products on the basis of direct labor cost (not hours). The rest of the overhead will continue to be charged to products using direct labor hours. Using this cost system, again compute the overhead cost that would be charged to one Lucky Leprechaun Clock.

The Irish Rovers Company produces 2 models of clocks, the 4-Leaf Clover Clock and the Lucky Leprechaun Clock. Information for 2008 for the 2 models of clocks is given below: 4-Leaf Clover Clock Direct Materials Cost per Unit $35.00 Direct Labor Cost per Unit $17.75 Direct Labor Hours per unit 8 hours per unit Annual production 40,000 units Purchase orders per year 1,000 purchases orders Lucky Leprechaun Clock $65.00 $60.00 1.5 hours per unit 20,000 units 5,000 purchase orders The total overhead for 2008 is $1,860,000. The company=s current cost system charges all overhead to products using direct labor hours. There are 62,000 total direct labor hours for the year