Connie Corporation manufactures two products (a and b). Totaloverhead costs of $840,000 has been divided into four cost poolsthat use the following activity drivers:
Product Machine hours # of setups # of orders # of shipments total A 2,000 200 600 1,000 B 3,000 100 200 1,000 Cost per pool 120,000 240,000 320,000 160,000 840,000
a) compute teh allocation rates per each activity driver listedabove?
b) what is the total overhead costs assigned to products A and Bassuming that overhead costs are allocated using the activity-basedcosting method?
c) compute the plant-wide rate overhead rate based on machinehours
d) What is the total overhead costs assigned to products A and Bassuming that overhead costs are allocated using the plant-widerate calculated in part (c)
Connie Corporation manufactures two products (a and b). Totaloverhead costs of $840,000 has been divided into four cost poolsthat use the following activity drivers:
| Product | Machine hours | # of setups | # of orders | # of shipments | total |
| A | 2,000 | 200 | 600 | 1,000 | |
| B | 3,000 | 100 | 200 | 1,000 | |
| Cost per pool | 120,000 | 240,000 | 320,000 | 160,000 | 840,000 |
a) compute teh allocation rates per each activity driver listedabove?
b) what is the total overhead costs assigned to products A and Bassuming that overhead costs are allocated using the activity-basedcosting method?
c) compute the plant-wide rate overhead rate based on machinehours
d) What is the total overhead costs assigned to products A and Bassuming that overhead costs are allocated using the plant-widerate calculated in part (c)
Related questions
Foster Company has determined a raw materials cost of $0.10 perpound; their loaded labor rate is $15 per hour. The Controller forFoster Company has established the following overhead cost poolsand cost drivers:
Overhead Cost Pool | Budgeted Overhead Cost | Cost Driver |
Machine setups | $150,000 | Number of setups |
Material handling | 52,500 | Pounds of raw material |
Quality control inspection | 37,500 | Number of inspections |
Other overhead costs | 90,000 | Machine hours |
Total | $330,000 | |
Overhead Cost Pool | Budgeted Level for Cost Driver | Compute ABC Overhead Rate |
Machine setups | 100 setups | |
Material handling | 50,000 pounds | |
Quality control | 1,000 inspections | |
Other overhead | 15,000 machine hours | |
Order no. 610 has been received for 1,000 units of product. Ithas the following production requirements: | ||
Direct Labor | 20 hours | |
Machine setups | 5 setups | |
Raw material | 10,000 pounds | |
Inspections | 12 inspections | |
Machine hours | 600 machine hours | |
Required:
A. Compute the activity-based costing (ABC) rates for each ofthe four cost drivers; write answers in the table above. (4points)
B. Compute the total overhead that should be assigned to orderno. 610 by using activity-based costing. (4 points)
C. Suppose that Foster were to use a single, predeterminedoverhead rate based on machine hours. Compute the rate per hour andthe total overhead assigned to order no. 610. (4 points)
D. Compute the total product cost of one unitfor order no. 610, using activity-based costing rates. (4points
Altex Inc. manufactures two products: car wheels and truckwheels. To determine the amount of overhead to assign to eachproduct line, the controller, Robert Hermann, has developed thefollowing information.
| Car | Truck | |
|---|---|---|
| Estimated wheels produced | 40,000 | 10,000 |
| Direct labor hours per wheel | 1 | 3 |
Total estimated overhead costs for the two product lines are$770,000.
Instructions
(a)
Compute the overhead cost assigned to the car wheels and truckwheels, assuming that direct labor hours is used to allocateoverhead costs.
(b) Hermann is not satisfied with the traditionalmethod of allocating overhead because he believes that most of theoverhead costs relate to the truck wheels product line because ofits complexity. He therefore develops the following three activitycost pools and related cost drivers to better understand thesecosts.
| Activity CostPools | Expected Use of Cost Drivers | Estimated Overhead Costs |
|---|---|---|
| Setting up machines | â1,000 setups | $220,000 |
| Assembling | 70,000 labor hours | â280,000 |
| Inspection | â1,200 inspections | â270,000 |
Compute the activity-based overhead rates for these three costpools.(c) Compute the cost that is assigned to the carwheels and truck wheels product lines using an activity-basedcosting system, given the following information.
| Expected Use of Cost Drivers per Product | ||
|---|---|---|
| Car | Truck | |
| Number of setups | 200 | 800 |
| Direct labor hours | 40,000 | 30,000 |
| Number of inspections | 100 | 1,100 |
(d)
What do you believe Hermann should do?
