Lillis Manufacturing makes a variety of industrial fittings. The products are similar, but not identical, and all
Question:
Lillis Manufacturing makes a variety of industrial fittings. The products are similar, but not identical, and all go through the same processes. Some orders from Lillis go to companies in regions with strict environmental regulations. Lillis is required to conduct compliance tests on those orders before shipment.
The company produces to order and uses a job costing system. Overhead is applied to jobs based on direct labor cost. The cost analyst at Lillis recently put together an estimate of overhead for the coming year, which is shown in the following table.
CategoryAmountMachining$1,024,000Assembly824,000Setup labor944,000Packaging804,000Compliance testing724,000Total$4,320,000
Three jobs were started and completed in November. Details on the jobs follow.
Job 1101Job 1102Job1103Direct materials$6,600$7,560$6,625Direct labor$16,500$20,160$17,225Number of units330630530Direct labor hours240800360Machine hours630830730Production runs121Compliance testing required?YesNoYes
Lillis is considering adopting an activity-based costing system. The cost analyst has studied the system and has recommended the following cost drivers for each of the overhead categories. She has also estimated the annual volume for each of the cost drivers. This information follows.
Overhead CategoryCost DriverAnnual Cost Driver VolumeMachiningMachine hours51,200machine-hoursAssemblyDirect-labor hours16,000direct-labor hoursSetup laborProduction runs80production runsPackagingUnits536,000unitsCompliance testingOrders tested20orders tested
The average direct labor rate at Lillis is $90 per hour.
Required:
a.What is the unit cost for each of the three jobs started and completed assuming Lillis uses their current costing system?(Round your answers to 2 decimal places.)
b.What is the unit cost for each of the three jobs started and completed assuming Lillis adopts the ABC system as designed by the cost analyst?(Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Expert Answer:
Lets solve this step by step Current Costing System Traditional Job Costing a Unit Cost Calculation for Each Job The unit cost under the current costi... View the full answer
