REQUIRED: 1. Using the estimates for the year, compute the predetermined overhea
ID: 2331490 • Letter: R
Question
REQUIRED:
1. Using the estimates for the year, compute the predetermined overhead rate for each activity (this is step 4 of the activity-based costing process).
2. Using the activity rates calculated in requirement (a) and the actual cost driver activity levels shown for January, allocate overhead to the Z1 product for the month of January (this is step 5 of the activity-based costing process).
3. Calculate the overhead cost per unit for the month of January for the Z1 product. Round results to the nearest cent.
4. For each product, calculate the product cost per unit of Z1 for the month of January. Round results to the nearest cent
1. Stillwater Company identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year. (These are the first three steps of activity-based costing.) Estimated Annual Overhead Costs Estimated Annual Cost Driver Activity Cost Driver Ordering parts Tracking inventory of parts Running machines Inspecting finished products Number of purchase Number of parts purchased Machine hours $ 400,000 5,000 purchase 80,000 parts purchased 7,000 machine hours Inspections hours 1,000 inspection hours Total 510,000 The company produces three products, Z1, Z2, and Z3. Information about these products for the month of January follows: Z1 Z2 Z3 $100 35 $ 75 $200 70 Direct materials cost per unit Direct labor cost per unit Overhead cost per unit Product cost per unit Units produced 250 units 500 units 700 units Actual cost driver activity levels for the month of January are as follows: Z1 Z2 Z3 Number of purchase requisitions Number of parts purchased Machine hours Inspections hours 50 70 100 330 10 310 30 50Explanation / Answer
Answers
Activity
Overhead cost amount
Cost drivers
Estimated no. of cost drivers
Activity Rate per cost driver
[A]
[B]
[C = A/B]
Ordering Parts
$ 400,000.00
Purchase requisition
5,000
Purchase requisition
$ 80.00
per Purchase requisition
Tracking Inventory
$ 560,000.00
Parts purchased
80,000
Parts purchased
$ 7.00
per Parts purchased
Running Machines
$ 350,000.00
machine hours
7,000
machine hours
$ 50.00
per machine hours
Inspecting Finished Products
$ 200,000.00
Inspection hours
1,000
Inspection hours
$ 200.00
per Inspection hours
Total
$ 1,510,000.00
Activity
Activity Rate per cost driver
No. of cost drivers for 'Z1'
Overhead cost allocated to Z1
[A (calculated above)
[B]
[C = A x B]
Ordering Parts
$ 80.00
per Purchase requisition
50
$ 4,000.00
Tracking Inventory
$ 7.00
per Parts purchased
4,000
$ 28,000.00
Running Machines
$ 50.00
per machine hours
330
$ 16,500.00
Inspecting Finished Products
$ 200.00
per Inspection hours
10
$ 2,000.00
Total Overhead cost allocated
$ 50,500.00
A
Total Overhead cost allocated to Z1
$ 50,500.00
B
No. of units produced Z1
250
C = A/B
Overhead cost per unit
$ 202.00
A [given]
Direct Material cost per unit
$ 100.00
B [given]
Direct labor cost per unit
$ 35.00
C [calculated above]
Overhead cost per unit
$ 202.00
D = A+B+C
Total cost per unit of Z1
$ 337.00
Activity
Overhead cost amount
Cost drivers
Estimated no. of cost drivers
Activity Rate per cost driver
[A]
[B]
[C = A/B]
Ordering Parts
$ 400,000.00
Purchase requisition
5,000
Purchase requisition
$ 80.00
per Purchase requisition
Tracking Inventory
$ 560,000.00
Parts purchased
80,000
Parts purchased
$ 7.00
per Parts purchased
Running Machines
$ 350,000.00
machine hours
7,000
machine hours
$ 50.00
per machine hours
Inspecting Finished Products
$ 200,000.00
Inspection hours
1,000
Inspection hours
$ 200.00
per Inspection hours
Total
$ 1,510,000.00
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