Louis Corporation,which uses an activity-based costing system,produces travel trailers and boat trailers.The company allocates batch setup costs to the two products using the following basic data: $$\begin{array} { | l | r | r | }
\hline & \text { Travel trailers } & \text { Boat trailers } \
\hline \text { Budgeted urits to be produced } & 2,000 & 3,000 \
\hline \text { Budgeted number of setups } & 380 & 420 \
\hline \text { Budgeted number of direct labor hours per unit } & 20 & 10 \
\hline
\end{array}$$ Total budgeted setup costs for the year are $140,000.
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If the setup costs are allocated using direct labor hours,how much of the total setup costs would be allocated to boat trailers?
A)$ 60,000
B)$ 105,000
C)$ 140,000
D)$ 326,667

Question

Louis Corporation,which uses an activity-based costing system,produces travel trailers and boat trailers.The company allocates batch setup costs to the two products using the following basic data: $$\begin{array} { | l | r | r | } 
\hline & \text { Travel trailers } & \text { Boat trailers } \
\hline \text { Budgeted urits to be produced } & 2,000 & 3,000 \
\hline \text { Budgeted number of setups } & 380 & 420 \
\hline \text { Budgeted number of direct labor hours per unit } & 20 & 10 \
\hline
\end{array}$$ Total budgeted setup costs for the year are $140,000.
-
If the setup costs are allocated using direct labor hours,how much of the total setup costs would be allocated to boat trailers?
A)$ 60,000
B)$ 105,000
C)$ 140,000
D)$ 326,667

Quizplus · Accepted Answer

The total direct labor hours for travel trailers are 2,000 units * 20 hours = 40,000 hours, and for boat trailers are 3,000 units * 10 hours = 30,000 hours. The total direct labor hours are 70,000 hours. The proportion for boat trailers is 30,000/70,000. Therefore, the setup costs allocated to boat trailers are $140,000 * (30,000/70,000) = $60,000.

Louis Corporation,which Uses an Activity-Based Costing System,produces Travel Trailers and Boat