Telecom Company Produces a Cell Phone That Sells for $150,and

question 64

Essay

Telecom Company produces a cell phone that sells for $150,and a smart phone that sells for $350.Last year,total overhead costs of $550,000 were allocated based on direct labor hours.A total of 12,000 direct labor hours were required last year to build 6,000 cell phones (2 hours per unit),and 10,000 direct labor hours were required to build 2,000 smart phones (5 hours per unit).Total direct labor and direct materials costs for last year were:

Management of Telecom Company would like to use activity-based costing to allocate overhead rather than using one plantwide rate based on direct labor hours.The following estimates are for the activities and related cost drivers identified as having the greatest impact on overhead costs.

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Definitions:

Juxtaglomerular Apparatus

A structure in the kidney that regulates blood pressure by managing the release of renin.

Blood Pressure

The pressure of circulating blood against the walls of blood vessels, often measured for diagnosis since it is closely related to the force and rate of the heart's contractions and the diameter and elasticity of the arterial walls.

Loop of Henle

A section of the nephron in the kidney that functions in water and salt balance, crucial for urine concentration.

Osmotic Pressure

Measure of the tendency of water to move across a selectively permeable membrane; visible as an increase in liquid on the side of the membrane with higher solute concentration.