5. Lemuel Office Equipment Corporation manufactures two types of filing cabinets-Deluxeand Executive-and applies manufacturing overhead to all units at the rate of P80 permachine hour. Production information follows.Direct-material costDirect-labor costDeluxeP4025ExecutiveP6525Budgeted volume (units)16,00030,000The controller, who is studying the use of activity-based costing, has determined that thefirm's overhead can be identified with three activities: manufacturing setups, machineprocessing, and product shipping. Data on the number of setups, machine hours, andoutgoing shipments, which are the activities' three respective cost drivers, follow.SetupsMachine hoursOutgoing shipmentsDeluxe10032,000200Executive6045,000150Total16077,000350The firm's total overhead of P6,160,000 is subdivided as follows: manufacturing setups,P1,344,000; machine processing, P3,696,000; and product shipping, P1,120,000.waury.3. Is the cost of the Deluxe filing cabinet overstated or understated (i.e., distorted) bythe use of machine hours to allocate total manufacturing overhead to production? Byhow much?4. Calculate the aggregate amount by which the Deluxe cabinet line is undercosted bythe company's current traditional overhead costing procedures. Then calculate theaggregate amount by which the traditional system overcosts the Executive cabinetline.5. Assume that the current selling price of a Deluxe filing cabinet is P270 and themarketing manager is contemplating a P30 discount to stimulate volume. Is thisdiscount advisable? Briefly discuss.

Name: 5. Lemuel Office Equipment Corporation manufactures two types of fili
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Description: 5. Lemuel Office Equipment Corporation manufactures two types of filing cabinets-Deluxeand Executive-and applies manufacturing overhead to all units at the rate of P80 permachine hour. Production information follows.Direct-material costDirect-labor

Answer - Part 4 - Calculation of aggregate amount by which cabinet is undercosted- Deluxe…

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5. Lemuel Office Equipment Corporation manufactures two types of filing cabinets-Deluxe and Executive-and applies manufacturing overhead to all units at the rate of P80 per machine hour. Production information follows. Delxe P40 25 16,000 Executive P65 25 Direct-material cost Direct-labor cost Budgeted volume (units) 30,000 The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities' three respective cost drivers, follow. Deluxe 100 32,000 200 Executive 60 45,000 150 Total 160 7,000ר 350 Setups Machine hours Outgoing shipments The firm's total overhead of P6,160,000 is subdivided as follows: manufacturing setups, P1,344,000; machine processing, P3,696,000; and product shipping, P1,120,000. 3. Is the cost of the Deluxe filing cabinet overstated or understated (i.e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? By how much? Fune

5. Lemuel Office Equipment Corporation manufactures two types of filing cabinets-Deluxe and Executive-and applies manufacturing overhead to all units at the rate of P80 per machine hour. Production information follows. Delxe P40 25 16,000 Executive P65 25 Direct-material cost Direct-labor cost Budgeted volume (units) 30,000 The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities' three respective cost drivers, follow. Deluxe 100 32,000 200 Executive 60 45,000 150 Total 160 7,000ר 350 Setups Machine hours Outgoing shipments The firm's total overhead of P6,160,000 is subdivided as follows: manufacturing setups, P1,344,000; machine processing, P3,696,000; and product shipping, P1,120,000. 3. Is the cost of the Deluxe filing cabinet overstated or understated (i.e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? By how much? Fune

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter18: Activity-based Costing

Section: Chapter Questions

Problem 3CMA: Young Company is beginning operations and is considering three alternatives to allocate...

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