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.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

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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.

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