The following overhead cost information is available: Activity-------Allocation
ID: 2345764 • Letter: T
Question
The following overhead cost information is available:Activity-------Allocation Base---------overhead cost
Purchasing--#of purchase orders---$400000
Receiving---# of shipments-----------100000
Machine-----# of setups---------------300000
Assembly---direct labor hours-------125000
Quality-------# of inspections---------75000
During the year:
1000 purchase orders issued
300 shipments
600 machine setups
750 inspections
employees worked 10000 direct labor hours
A batch of 200 has the following cost activity
purchase orders 7
shipments of material 12
machine setups 2
direct labor 50
inspections 3
A: Determine the overhead allocation for the batch of 200 monitors under the TRADITIONAL overhead allocation base on direct labor hours
B: Determine the overhead allocation for batch under ACTIVITY BASED costing. Round interim calculations and final answer to two decimal points
Explanation / Answer
A: Determine the overhead allocation for the batch of 200 monitors under the TRADITIONAL overhead allocation base on direct labor hours Total overhead = 400,000+ 100,000 + 300,000 + 125,000 + 75,000 = $1,000,000 Divide by direct labor hours: $1,000,000/10,000 direct labor hour = $100 per direct labor hour Overhead allocation = 50 direct labor hours* $100 per direct labor hour = $5000 Answer: $5,000 B: Determine the overhead allocation for batch under ACTIVITY BASED costing. Round interim calculations and final answer to two decimal points Rates: PUrchasing: 400,000/1000 = $400 per purchae order receiving: 100,000/300 = $333.33 per shipment machine: 300,000/600 = $500 per setup assembly: 125,000/10,000 = $12.50 per direct labor hour quality: 75,000/750 = $100 per inspection Allocated to 200 monitors: 400*7 = 2800 333.33*12 = 3999.96 500*2 = 1,000 12.50*50 = 625 100*3 = 300 total = 8724.96 answer: $8,724.96
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