Problem 316A Contrasting ABC and Convehtiohal Product CUss I

Problem 3-16A Contrasting ABC and Convehtiohal Product CUss I, LON L The following information applies to the questions displayed below For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct labor time per unit and only a small amount of machining Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours Despite the growing popularity of the company\'s new LEC 90, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company\'s costing system. Direct material and direct labor costs per unit are as follows Direct materials Direct labor (0.20 hours and 0.60 hours$10.00 per hour) LEC 40 $28.00 $ 2.00 LEC 90 $44.00 $ 6.00 Management estimates that the company will Incur $856,000 in manufacturing overhead costs during the current year and 80,000 units of the LEC 40 and 40,000 units of the LEC 90 will be produced and sold. References Problem 3-16A Contrasting ABC and Coniventional Product Costs [LO3-2 LO3-3, L034 Section Break value 3.00 points Required informatio Problem 3-16A Part 1 Required 1.a. Compute the predetermined overhead rate assuming that the company continues to apply manufacturing overhead cost on the basis of direct labor-hours. (Round your answer to 2 decimal places.) Predetermined overthead rateper DLH

Solution

Answer 1(a)

Answer 1(b)

Answer 2

Answer 3(a)

Answer 3(b)

Total Manufacturing Overhead	8,56,000
Direct Labour Hours required for LEC 40	16,000
Direct Labour Hours required for LEC 90	24,000
Total Direct Labour Hours required	40,000
Ovrehead Rate based on Direct Labour Hr	21.40
	Per Hour