Krypton Ltd.’s budgeted information relating to the manufacture of two of its pr
ID: 2341935 • Letter: K
Question
Krypton Ltd.’s budgeted information relating to the manufacture of two of its products is presented below:
# of times driver used
Activity
Cost
Driver
Product A
Product B
Setup
$68048
# of batches
30
10
Engineering
$121471
# of engineering hours
6849
10742
Machine Maintenance
$91358
# of machine hours
7000
12000
Direct labour cost
$11/hour
$347283
$535269
Direct materials
$127464
$92764
What would be the pre-determined overhead rate under a traditional costing model, with overhead allocated based on direct labour hours?
Select one:
a. $3.50
b. $15.97
c. $0.32
d. $1.28
Plaid Manufacturing Co. produces two products: G1 and M1. The company uses an activity based costing system. The following are the activities, budgeted total cost and cost drivers per activity for the year 20x9:
Activity
Budgeted Cost
Cost Base
Cost Base Volume
Assembly
$878839
# of DL hours
37235
Inspection
$658700
# of units
20728
Shipping
$328833
# of batches
199
Budgeted data relating to the production of M1 for 20x9 is given below:
Number of units
1500
Units per batch
79
Direct labour hours (@ $18 per hour)
19032 hours
Direct materials (@ $12.11 per kg.)
896 kg.
What is the total cost of producing M1 in 20x9?
Select one:
a. $539096
b. $881672
c. $528245
d. $980838
# of times driver used
Activity
Cost
Driver
Product A
Product B
Setup
$68048
# of batches
30
10
Engineering
$121471
# of engineering hours
6849
10742
Machine Maintenance
$91358
# of machine hours
7000
12000
Direct labour cost
$11/hour
$347283
$535269
Direct materials
$127464
$92764
Explanation / Answer
Solution 1: answer is a. $3.50
Working:
Total labor hours = total labor cost / labour rate
= [347,283+535,269] / 11
= 80,232 labour hours
Overhead allocation rate
= total overhead cost / total labor hours
= [ 68,048+121,471+280,877] / 80,232
= $3.50
Solution 2 answer is b. $881,672
Cost Amount Direct material 896x $12.11 10,850.56 Direct labour 19032x $18 342,576 Assembly 878,839x19032/37,235 449,202.74 Inspection 658,700x1500/20,728 47,667.41 Shipping 328,833x19/199 31,396.11 $881,672 approx.Related Questions
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