Question

Linger Products uses a two-stage allocation method to assign costs to its products. The following information has been provided for March: Product 1 Product 2 Total Units 3,000 2,000 5,000 Machine hours 2,000 4,000 6,000 Direct labor hours 2,000 2,000 4,000 Direct materials $ 60,000 $ 60,000 $ 120,000 Direct labor 45,000 45,000 90,000 Manufacturing overhead Utilities (machine related) $ 3,000 Supplies (labor related) 8,000 Training (labor related) 20,000 Supervision (labor related) 17,000 Machine depreciation (machine related) 24,000 Lease on factory (machine related) 33,000 Miscellaneous (labor related) 5,000 Total manufacturing overhead $ 110,000 Required: (a) Allocate the manufacturing overhead to two cost pools: machine-related and labor-related. (b) Compute the predetermined overhead rate for the two pools, using machine hours and direct labor hours as the bases. (c) Compute the total costs of production for each of the two products.

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

The following information has been provided for March:

Product 1= 3,000

Product 2= 2,000

Total Units= 5,000

Machine hours

Product 1= 2,000

Product 2= 4,000

Total= 6,000

Direct labor hours

P1= 2,000

P2= 2,000

Total= 4,000

Direct labor:

P1= 45,000

P2= 45,000

Total= 90,000

Manufacturing overhead:

Utilities (machine related) $ 3,000

Supplies (labor related) 8,000

Training (labor related) 20,000

Supervision (labor related) 17,000

Machine depreciation (machine related) 24,000

Lease on factory (machine related) 33,000

Miscellaneous (labor related) 5,000

Total manufacturing overhead $ 110,000

A) Machine related:

Utilities= 3,000

Machine depreciation= 24,000

Lease on factory= 33,000

Total= 60,000

Labor-related:

Supplies (labor related) 8,000

Training (labor related) 20,000

Supervision (labor related) 17,000

Miscellaneous (labor related) 5,000

Total= 50,000

B) Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machine:

Estimated manufacturing overhead rate= 60,000/6000= $10 per machine hour

Labor:

Estimated manufacturing overhead rate= 50,000/4000= $12.5 per direct labor hour

C)

Product 1:

Direct material= 60,000

Direct labor= 45,000

MOH= (10*2000) + (12.5*2000)= $45,000

Total= 150,000

Product 2:

Direct material= 60,000

Direct labor= 45,000

MOH= (10*4000) + (12.5*2000)= 65,000

Total= 170,000