Lyons,Inc,has Identified the Following Overhead Costs and Activity Drivers for Next

question 87

Essay

Lyons,Inc.,has identified the following overhead costs and activity drivers for next year:
$\begin{array}{lrlr} \underline{\text {Overhead Item}}& \underline{\text {Expected Cost}}& \underline{\text {Activity Driver}}& \underline{\text {Expected Qty.}}\\\text { Setup costs } & \$ 150,000 & \text { Number of setups } & 1,200 \\\text { Ordering costs } & 40,000 & \text { Number of orders } & 10,000 \\\text { Maintenance } & 200,000 & \text { Machine hours } & 16,000 \\\text { Power } & 20,000 & \text { Kilowatt hours } & 100,000\end{array}$ The following are the two product models completed during the year:
$$\begin{array} { l r r } & \text { Madel XX } & \text { Madel YY } \\\text { Direct materials } & \$ 2,250 & \$ 2,500 \\\text { Direct labour } & 3,000 & 1,875 \\\text { Units completed } & 375 & 300 \\\text { Direct labour hours } & 90 & 110 \\\text { Nurber of setsps } & 6 & 8 \\\text { Nurmber of arders } & 8 & 15 \\\text { Machine hours } & 180 & 150 \\\text { Kilowatt hours } & 90 & 120\end{array}$$ The company's normal activity is 20,000 direct labour hours.
a.Determine the unit cost for each job using direct labour hours to apply overhead.
b.Determine the unit cost for each job using the four activity drivers.(Round amounts to 2 decimal places.)
c.Which method produces the more accurate cost assignment? Why?

---

Definitions:

Philippine Corn

A major agricultural crop in the Philippines, important both for domestic consumption and as a component of the country's agricultural exports.

Tariffs

Government taxes on products or services entering a country that primarily serve to raise prices on imports.

Chinese Tire Imports

Refers to the importation of tires from China into other countries, which has often been a point of trade and tariff discussions.

Protectionism

The practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas.