Exercise 4Your Co. sells two products (1 & 2), and two departments serve factory

Question

Exercise 4Your Co. sells two products (1 & 2), and two departments serve factory workers (materials dept. & support dept.). To follow are various production data xpected Usage Expected Cost Driver Purchase orders Square feet storage Parts Activity Product1 Product 2Total Purchasing & receiving Moving materials Machine maintenance $10,000 $5,000 $7,500 800 400 100 200 600 200 1,000 1,000 300 Materials Storage of materials $15,000 $2,500 $10,000 Square feet production 3,000 5,000 5,000 Machine hours 1,000 3,000 3,000 2,000 2,000 2,000 Support Cleaning workspace Square feet production Factory security Assuming Your Co uses the ABC method to assign overhead, calculate the following ABC rates: a) Purchasing & receiving b) Storage of materials c)Moving materials d) Machine maintenance e)Cleaning workspace f) Factory security per PO per sq. ft storage per part per mach. hr per sq. ft production per sq. ft production Calculate the overhead assigned to products 1 & 2 from each cost pool: Product 1 Product 2 g) Purchasing & receiving h) Storage of materials i)Moving material:s j)Machine maintenance k) Cleaning workspace I) Factory security m) Total overhead Assume 1,000 units of product 1 and 500 units of product 2 were produced Product 1 Product 2 p) Overhead cost per unit

Explanation / Answer

Calculation of following ABC Rates a Purchasing and Receiving 10 per PO (10000/1000) b Storage of materials 5 Pr sq. ft storage (5000/1000) c Moving materials 25 Per part (7500/300) d Machine Maintenance 5 per mach. Hr (15000/3000) e Cleaning Workspace 0.5 per sq. ft production (2500/5000) f Factory Security 2 per sq. ft production (10000/5000) Calculation of overhead assigned to products Product 1 Product 2 g Purchasing and Receiving 8000 2000 h Storage of materials 2000 3000 i Moving materials 2500 5000 j Machine Maintenance 5000 10000 k Cleaning Workspace 1500 1000 l Factory Security 6000 4000 m Total overhead 25000 25000 Product 1 Product 2 Overhead cost per unit 25 50

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