Lanen Company produces two automotive parts, carburetors and air filters. Both products are made in the...

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Lanen Company produces two automotive parts, carburetors and air filters. Both products are made in the same manufacturing facilities but are produced under different processes. To accomplish an accurate allocation of production costs, the company uses activity-based costing. The cost accountant for the company provided information about the activities used to produce the company's products. The activities were organized into the following overhead cost categories. The most appropriate cost driver for each category is also provided. Estimated Category Cost Driver Carburetors Air Filters Cost Unit-level P 60,000 Labor hours 900 700 Batch-level P 22,000 Set-ups 20 30 Storage Product-level P 45,000 2,000 sq.m. 4,000 sq.m. space Machine Facility-level P 100,000 7,500 12,500 hours If carburetors and air filters require the same amount of direct labor, what will be effect if labor hours are used as the allocation base for product-level costs? Carburetors will be over costed Air filters will be over costed Air filters and carburetors will be under costed Air filters and carburetors will be over costed Lanen Company produces two automotive parts, carburetors and air filters. Both products are made in the same manufacturing facilities but are produced under different processes. To accomplish an accurate allocation of production costs, the company uses activity-based costing. The cost accountant for the company provided information about the activities used to produce the company's products. The activities were organized into the following overhead cost categories. The most appropriate cost driver for each category is also provided. Estimated Category Cost Driver Carburetors Air Filters Cost Unit-level P 60,000 Labor hours 900 700 Batch-level P 22,000 Set-ups 20 30 Storage Product-level P 45,000 2,000 sq.m. 4,000 sq.m. space Machine Facility-level P 100,000 7,500 12,500 hours If carburetors and air filters require the same amount of direct labor, what will be effect if labor hours are used as the allocation base for product-level costs? Carburetors will be over costed Air filters will be over costed Air filters and carburetors will be under costed Air filters and carburetors will be over costed

Answer rating: 100% (QA)

ANSWER B Air filters will be over costed In general the more expensive air filters are more effectiv... View the full answer